– According to the RP Data Home Value Index, the Melbourne median house price has surged by 9.3 % over the financial year 2013/2014 and 11.7% in the year to August 2014, coming in second after Sydney and proving strong house price growth.

– While major banks claimed there is no bubble in the market, RBA flagged housing risks.

– ABS’s September release stated that loans to property investors in Australia jumped to a record high as a proportion of total home loans, excluding refinancing.

– Baby boomers have been dominating in the investment property market.

– In addition, foreign investors have been very active in the Melbourne residential market.

– Melbourne comprises 34% of the A$17.2 billion worth of foreign investments into Australia’s residential real estate approved by the Foreign Investment Review Board (financial year 2013).

– Demand for housing is predominantly sustained by strong population growth.

– Melbourne’s population is expected to grow almost twofold to 7.7 million by 2051.

– An average 2.1% population growth has been recorded for the past ten years and a 2% per annum growth is forecast for the next three decades.

– Besides overseas migration, interstate migration is a major driver.

– According to ABS, Victoria had the highest number of interstate migrants in the past year.

– New housing, particularly higher density residential developments, is needed to accommodate the increase in population.

– The number of residential dwellings rose by 139,900 throughout the year in Australia and more than half of these were in Victoria (42,400) and New South Wales (31,200).

– However, there is concern over the rental vacancy rate which might rise above market equilibrium if population growth falls short of expectations.

– The financial and professional services industries in Melbourne have continued to grow and are catching up with Sydney.

– However, Melbourne’s GDP growth was the slowest since 2001.

– There is a possibility that Melbourne is undergoing unaddressed structural challenges, particularly as it moves away from its core manufacturing base.

– Employment opportunities in healthcare are anticipated to increase over the next few years with the completion of the Bendigo Hospital and the Northern Hospital precinct in Epping, which leads to a forecast of strong housing demand in these regions.

– On the other hand, manufacturing is considered a sunset industry as car manufacturers such as Toyota, Ford and Holden have decided to quit manufacturing in Australia.

– The closure of car manufacturers will likely have a direct impact on the demand for housing in nearby suburbs such as Altona and Geelong.

– The Victorian unemployment rate was 6.7% in September this year, at its highest since December 2001.

– The outlook for the Melbourne property market remains positive in the short term, although investors should be aware of macro market risks such as rising  unemployment, sluggish household income growth, affordability issues and cost of living pressures.

– As the RBA is anticipated to keep the cash rate constant until mid 2015 and together with the depreciating Australian dollar,  modest growth is expected in housing prices, especially for property in prime locations and with a point of difference.

– The outer eastern suburbs are strongly attracting buyers due to their affordability.

 

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– The overall Melbourne residential market has increased in the middle eastern and south eastern suburbs such as Camberwell, Burwood, Balwyn, Doncaster, Glen Waverley and Wantirna.

– The market is currently experiencing strengthening conditions with moderate to strong price growth achieved due to increased buyer interest.

– Purchaser interest has been influenced by the current low interest rates and high clearance rates which have created a confident, positive market.

– In volume terms, owner-occupier demand is pretty steady.

– The interest in purchasing property has grown among average owner- occupiers who are looking for a primary place of residence.

– Owner-occupier purchasers also consider the size of the property, their marital status, occupancy and income in order to find a suitable property to meet their needs.

– Despite recent property growth, in the current market, the average buyer is looking to purchase a detached house on a decent site due to potential capital growth via the possible land value increase.

– In June 2014, best performing suburbs in middle eastern and south eastern suburbs were Mitcham and Burwood with respective quarterly changes of 13.2% and 7.1% for houses.

– Due to popularity and current high demand in these areas, developers continue to subdivide established land and build new dwellings to increase density across these neighbourhoods.

– Most properties are located in quiet residential streets with local views and within 15 to 30 kilometres of the Melbourne Central Business District.

– The median price for houses in the area is around $700,000 and it has increased in part due to availability of sought after primary and secondary schools in the area.

– In terms of investors, they are looking for properties to create greater returns in rent payments or capital growth.

– The Australian Bureau of Statistics released housing finance data for July 2014 with the investment finance commitment increasing by 6.8%.

– In the current climate, investors are occupying the majority of housing finance demand. – Compared to owner-occupied purchasers, investors consider not only location and local infrastructure but also the property growth history and comparable rental properties on the market to maximise returns and minimise risks.

– With returns on safe asset classes extremely low, many investors are purchasing property in Melbourne’s safe suburbs such as Wantirna. – Statistics indicate that 79% of Wantirna properties are owner-occupied with a recent decline in the number of sales. – According to RP Data, Wantirna had only 89 house sales and 17 unit sales in 2014 compared to the previous year  of 154 and 33 sales respectively.

– However, with the property sector growth, Wantirna has undergone some redevelopment changes and subdivided sites into two and three unit developments are becoming more common.

– According to the REIV, Wantirna’s house values have grown by 10% in the quarter ending June 2014 compared to March 2014 and the current median price in the area is $672,250 for houses and $472,000 for units

– Property values are continuing to rise due to increased competition for housing driven in part by population growth. – However, at some point in the future, demand will slow as purchasers are no longer able to afford the homes available for sale and future growth in values will slow while interest rates will most likely increase.

– Furthermore, the current market shows a very strong supply-side response with a high number of dwelling approvals over the past 12 months.

– Additional supply could slow price increases and release the pressure from rising values.

– The housing market has generally provided solid capital gains over the past decade with growth conditions across Melbourne currently strong, however the market moves in cycles and the growth being seen in Melbourne will eventually slow and soften.

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Simply jump on the HTW website www.htw.com.au  and follow the prompts.

 

Thanks to Therese from Alphabroker