Melbourne's two dangerous residential markets

Most research sources have Melbourne leading on annual house price growth – and it’s not so surprising, when you look at the sales data.

The ABS, the Real Estate Institute of Australia and Domain all have Melbourne leading the nation for house price increases (although Hobart is challenging strongly).

Where’s Sydney in all this? CoreLogic continues to publish massive growth numbers for the Sydney house market, but those other three sources listed in the previous paragraph all record annual growth around 3 or 4 percent for the Sydney housing market.

Quite apart from the ludicrous proposition that you can reduce a metropolitan area with over 700 suburbs down to a single growth figure, this reinforces my view that all real estate statistics are rubbery figures to some degree.

When you have media constantly quoting one source (the one that reports massive annual growth) and then all those other sources which are suggesting Sydney’s price boom is over (but largely ignored by media), it’s difficult to know what to believe.

Here’s what I do know for certain: sales volumes gradually faded in Melbourne throughout 2016 but, late in the year and early in 2017, staged a revival. The city’s various markets are proving very resilient, no doubt boosted by nation-leading population growth and a state economy which, while not as strong as Sydney’s, is performing well.

My research shows that the busiest markets are split between the best of the Middle Melbourne areas and the strongest of the affordable outer-ring areas.

And the most affordable areas of metropolitan Melbourne have taken over as the city’s price-growth leaders. Many have delivered double-digit growth in their median house prices in the past 12 months.

As one example, all suburbs in the Sunshine precinct in Melbourne’s west are above 12%, including some which have grown 23-25% in the past year. Again, this data is presented with a reminder that all real estate figures are rubbery – but when all suburbs in an area are delivering the same strong growth pattern, you can be reasonably confident that something notable is happening.

Two Middle Melbourne precincts stand out: the Moreland LGA and the Whitehorse LGA. Both have numerous suburbs where sales activity is still growing.

These and other Middle Ring precincts had been fading gradually, in terms of sales activity, throughout 2016 but have come roaring back to life. Sales levels are still lower than the peaks of 2015, but remain very solid and prices continue to grow.

Typical growth areas in the Moreland LGA include Glenroy, where sales have been 113, 149, 143 and 165 in consecutive quarters. Other standout suburbs are Coburg, Coburg North, Hadfield, Pascoe Vale, Oak Park and Pascoe Vale South.

Whitehorse was the Melbourne market leader in 2015 before sales levels plateau-ed in most of its suburbs throughout 2016. But there has been a recent revival to stronger sales activity, led by Blackburn, Burwood East, Mitcham, Nunawading and Surrey Hills.

Four bottom-end markets are close behind in the terms of the number of growth markets: the LGAs of Brimbank (west), Whittlesea (far north), Casey (far south-east) and Hume (far north).

The far north of metropolitan Melbourne features strongly. The Whittlesea LGA (seven) and the Hume LGA (five) jointly have 12 suburbs with growing sales activity.

Whittlesea is consistently one of the city’s strongest markets, driven by affordability, strong infrastructure and proximity to jobs nodes. The suburb of Lalor, with sales rising from 64 to 101 to 117 to 121 in recent quarters, is typical. Nearby Epping has lifted quarterly sales from 110 to 135 to 145. 

Neighbouring Hume has similar qualities. The suburb of Craigieburn has recorded sales totalling 175, 228, 239 and 244 in the past four quarters.

The leading precinct in the far south-east is the City of Casey, which has five Rising Steadily suburbs, led by Cranbourne, Doveton and Narre Warren.

Other affordable outer-ring precincts with growth markets include Melton is the far west, Wyndham in the far south-west and Frankston in the far south-east.

Middle-ring areas travelling well, in addition to Whitehorse and Moreland, include the LGAs of Monash (Ashwood, Glen Waverley and Mulgrave), Maroondah (Croydon North, Ringwood and Ringwood East) and Banyule (Heidelberg Heights, Ivanhoe and Greensborough).

The worst performers in an otherwise strong Melbourne market are the inner-city apartment precincts.

I classify both the Melbourne CBD and Docklands as Danger markets. Sales levels have dropped markedly at a time of increasing apartment supply and growing state and federal measures likely to discourage foreign investors, who are the target of many of the inner-city high-rise projects.

Terry Ryder is the founder of hotspotting.com.au. You can  email him or follow him on Twitter.