Rents Head Good News In Melbourne

Posted on 27/02/2019  
Rents Head Good News In Melbourne

While most data shows Melbourne property prices fell during 2018, there are still plenty of positive numbers coming out of the city’s property market.

Award-winning buyers’ agent Miriam Sandkuhler says a strengthening of the rental market heads the good news for investors in the Melbourne market – and there are also some positive outcomes on prices.

Sandkuhler, CEO of Property Mavens and best-selling author of Property Prosperity, says Real Estate Institute of Victoria (REIV) data indicates the city’s median house sale price actually increased by 1.4% in 2018 and the unit median by 1.8%.

The figures are different from those from CoreLogic, which claims a significant decrease in house prices, because of different methodologies. The REIV figures are based on the prices actually achieved for properties sold over the period - rather than the estimated value of all properties in the market, which is the method used by CoreLogic.

The overall median for Melbourne was pushed up, according to the REIV, by growth in Melbourne’s outer ring. Mt Martha recorded the biggest growth of 12.3%, to reach a median house price of $1,100,500.

The latest figures from realestate.com.au, the Australian Bureau of Statistics and SQM Research all suggest that Melbourne house prices, overall, are down but only moderately – around 2% or 3% in annual terms.

These results are supported by Hotspotting’s suburb-by-suburb analysis of the Melbourne metropolitan area, which finds that suburbs with solid growth in the past year significantly out-number those with falling values.

Most of the suburbs with substantial declines in median prices are those at the top end of the market, while the middle market remains solid and the cheaper outer-ring locations are still delivering price growth, though at slower rates of growth than before.

“No matter how you look at the figures, price growth has clearly moderated recently in Melbourne,” says Sandkuhler.

“But there is good news for investors, with the rental market on its way up.”

New data from Domain shows that weekly asking rents for houses are at record levels, rising 2.3% over the December Quarter to hit $440. Unit rents have plateaued, remaining at $410 per week.

The research found the city’s inner south was the best-performing region, with asking prices rising by $50 per week for houses and $20 per week for units.

The strong rents come in a climate of low vacancy rates, with Melbourne’s currently sitting at 2.2% (compared to 3.6% in Sydney), according to SQM Research.

Sandkuhler says the changes to tenancy laws in Victoria, that were passed last year and are set to be introduced in the middle of next year, may also lead to further rental price growth.

“Designed to give tenants more rights, these reforms appear to give some investors less control over their assets, so we expect it may lead to some exiting the market,” she says. “A tightening of supply with continued demand would lead to rental hikes.

“If the ALP is elected at the Federal Election, expected to held in May, and negative gearing is removed as planned, rents will likely strengthen even further, as this policy will also push some investors out of the market and reduce the availability of rental stock.”

While it is a buyers’ market amid a current slowdown, buyers can’t take for granted snagging a bargain, with the best properties still being snapped up - and for good prices.

“You don’t want to miss out, but you don’t want to pay too much,” she says. “Big prices are still being paid and records being set, including the $52.5 million sale of Malvern’s Stonington Mansion at 36 Glenferrie Road last year, that set a record sale price for Victoria.

“Many suburbs also saw new sale records set in 2018, including Moonee Ponds, Essendon, Glen Iris and Port Melbourne.”

Meanwhile, realestate.com.au data shows Middle Park is the most searched for suburb in Australia, with Red Hill coming in at 10th place, with both having double-digit price growth over the past 12 months.

 

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