Are apartment prices in Melbourne finally going to fall?
Professional opinions are divided over the future of Melbourne’s highly sought-after apartment market after a number of economists offered up their growth predictions for the next 12 months.
The median apartment price in Melbourne grew by over $20,000 in the year leading up to June 2017, but there is very little consensus over apartment prices for the next 12 months.
Real estate publisher, Domain, asked five economists how they thought Melbourne’s property market would react to record growth over the past year, with three economists expecting prices to fall by as much as 5% but two agreeing that prices will continue to grow at a rate of 5-10%.
AMP Capital chief economist Shane Oliver told Domain that APRA’s tightening regulations on interest-only loans would result in a drop in investment activity bringing apartment prices down.
“This, along with a surge in the supply of units, will likely result in falls in unit prices and a slowing in home price gains,” he said.
Taking Oliver’s most aggressive forecast of a 5% downturn in growth, median unit prices in Melbourne could end up cheaper in June 2018 than they were in June 2016.
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This sentiment was echoed by BIS Oxford Economics managing director Robert Mellor who predicted a 2% decline in price growth. He believes that stable interest rates and stamp duty exemptions will open the door for first-home buyers.
Mellor told Domain there will be a “substantial reduction in investor demand from local and offshore buyers, but a modest pickup in first-home buyers in response to state government changes on stamp duty.”
The decline in investment lending activity thanks to APRA’s tightening restrictions on interest-only loans, alongside these predicted declines in apartment price growth is good news for first-home buyers.
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“Melbourne is still very much a first home owners market,” said Mozo’s property expert, Steve Jovcevski.
The world’s most-liveable city recorded the highest clearance rates of any capital city in July and Jovcevski believes that much of the recent growth in the Melbourne property market has been down to Melbourne’s first-home buyers.
“I think that’s where a lot of this growth may be coming from. There are still plenty of properties in Melbourne under the new limit for stamp duty exemptions or discounts, which I think goes a long way to explaining why we saw such a boom after July 1,” he said.
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