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Key points
- The biggest falls in prices were for smaller units in inner-city suburbs, Domain data shows.
- Unit prices fell in Carlton, where many dwellings are student accommodation.
- Experts say unit prices could bounce back, as demand picks up.
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Melbourne’s property market may be picking up overall, but despite recent value growth and upbeat auction clearance rates, the median property price in some suburbs is lower than five years ago.
Smaller apartments in inner-city suburbs have been the hardest hit since 2018, an analysis of Domain data shows, while house prices have fallen in a handful of areas close to universities or where overseas buyers once flocked.
The biggest falls in median unit prices in the five years to June 2023 were in Carlton (-24.3 per cent), the CBD (-22.5 per cent) and West Footscray (-18 per cent).
House prices took the biggest tumble in Clayton (-13.5 per cent) and Box Hill (-10.5 per cent).
Westpac senior economist Matthew Hassan said units had become less attractive due to flammable cladding issues and COVID-19, when buyers sought bigger properties to work from home.
Melbourne also had an oversupply of units, since a number of new apartment builds were completed as state and international borders closed, leading to a fall in prices.
But the market is now in short supply of both houses and units, Hassan said, with sellers holding back after last year’s market downturn.
Hassan predicted unit prices would bounce back, as demand from buyers would remain higher than the number of homes for sale.
“The shortage of properties is becoming the dominant issue for the market and higher house prices will drive people into the more affordable segment, and into units,” Hassan said.
A report last year from the Productivity Commission found housing would be more affordable if more homes were built. The Victorian government last week announced plans to build 800,000 homes over the next decade in response to a housing crisis.
Certain types of units were hit hardest over the past five years, including smaller apartments and student accommodation.
Some units that sold recently have lost tens of thousands of dollars off their original sale price. A studio apartment in College Square in Carlton, which sold for $238,400 in 2005, sold earlier this month for $148,000, records show.
Another one-bedroom apartment in Bouverie Street, Carlton sold for $207,500 in 2007, and resold recently for $145,000.
Likewise, this two-bedroom unit on Dandenong Road in Prahran sold for $560,000 in 2020 but was snapped up this month for $530,550.
Harcourts Melbourne City principal Dionne Wilson said new apartment developments in Melbourne would be affecting median prices.
“New builds take seven to 10 years to catch up to their off-the-plan price,” she said. “There’s so much new volume that would be skewing the numbers.”
Older and larger apartments were selling better than modern builds and rising in price, she said.
Some properties are performing better than others.Credit: Eddie Jim
House prices went backwards in a handful of suburbs, such as Clayton and Box Hill. Ray White Oakleigh and Clayton senior sales executive Leigh Kelepouris said COVID had caused the overseas market to slow.
“Investors were buying older houses to rent out to students, but they have pulled back, and a lot of developers are now not willing to buy houses that need work because of the higher building costs,” Kelepouris said.
Quantify Strategic Insights principal, Angie Zigomanis, said changes to the rules for international buyers had hit pricing.
“Five years ago we started seeing a lot of these restrictions at a local, Australian level, like stamp duty surcharges on foreign buyers,” he said. “From a Chinese perspective, the government has been cracking down on money flying out of the country.”
He said some apartments were selling well and under competition, and two-bedroom, two-bathroom apartments were selling better than those with a single bedroom.
He expects unit prices to rise, especially as houses get more expensive and there are few options listed for sale.
“I think to some extent there will be a pick-up in unit prices – people are being priced out of certain markets, and they’ll look to a unit instead.”
BLVD Finance director and mortgage broker Daniel Koutzamanis said clients selling apartments to upgrade were either losing some money or getting about the same price they’d bought for.
However, competition is starting to grow for entry-level properties, and some first home buyers are having their mortgage pre-approval extended as they keep missing out on cheaper properties.
“Two or three years ago, clients were moving out further away from the city and building a house, but the rush for space is not as strong now,” Koutzamanis said. “Clients in the inner city are looking at units and townhouses just to get into the market.”
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