CEO’s address

Our reports each month consistently illustrates both the diversity and interrelatedness of property markets across Australia. What happens on a national and international scale has ramifications for market activity, but local drivers also contribute substantially to value shifts across each population centre.

Because of this, I’ve been struck by disparate moves in Melbourne’s residential real estate prices compared to those in other major capital cities. It begs the question, “Is Melbourne’s
performance a lead indicator for other Australian markets?”

Melbourne’s house price has trended lower at a time when most other major centres have seen value growth. Double digit annual gains in Brisbane, Adelaide and Perth, along with a
solid increase in Sydney’s median, are contrary to Melbourne’s median-price decrease. This has seen Melbourne go from being the nation’s second most expensive capital city to its
sixth in a relatively short period.

What’s been behind this shift in relativity? There are a few interesting data points to track when contemplating on this.

Firstly, sales activity remains relatively robust in Melbourne. Its proportion of transaction volumes remains similar to those for Brisbane, Adelaide and Sydney. So, it isn’t inactivity
that’s impacting prices.

Supply is another consideration. Recent reports indicate Melbourne has created more new housing in the past 10 years than other capitals, and that higher density as a proportion of
all housing has increased too. This would suggest demand for certain types of accommodation is being satisfied by supply.

There are other considerations too. Overall population growth in Victoria has remained comparable to other states and territories, fuelled in large part by new overseas arrivals. Of course, a recently announced federal-level cap on international student visas in 2025 could dramatically impact this. Meanwhile, Victoria’s Net Interstate Migration (NIM) is flat – not a great outcome for housing demand but it is a move away from the negative NIM of recent years.

Taking in this information, along with many other wider datapoints and comments from our on-the-ground specialists, I’d suggest Melbourne’s property price is unlikely to quickly “bounce back” toward long-term relative norms compared to other capitals. Instead, current information suggests Melbourne values will remain subdued with eventual gains over a much longer period than some might hope. I’d also venture other capital city prices will see their markets return to long-term average growth rates in the future. Certainly, increased competition among lenders for business at a time when rate cuts are on the horizon might imply enquiry levels are softening, which doesn’t normally bode well for overall property market activity.

History shows that Australia’s capital city property markets do tend to return to a relative normalcy, but the Melbourne experience indicates the rebound will be relatively conservative and extended this time around.

It’s a lesson in why the complexities of Australia’s property markets require specialist advisors to combine broad market understanding with localised, on-the-ground experience. This is exactly the sort of expert guidance you receive from our teams at Herron Todd White.

Please enjoy our October edition of Month In Review.

Gary Brinkworth

CEO