The Melbourne Property Market in 2012

Posted on February 20, 2012


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Ian James, Director of JPP Buyer Advocates has said, ” you can safely assume that property prices in the top third performing suburbs in Melbourne will more than double their current value. ” This comes on the back of his analysis that demand for housing will continue to outpace supply for some time.

And he isn’t the only one. Monique Wakelin, Managing Director of Wakelin Property Advisory has also pointed to stronger demand, along with other boosting factors. “The elements are in place for moderate property price growth in 2012 in our capital cities,” she says. “Growing incomes, falling interest rates, improved affordability and low inflation and unemployment will underpin demand.  Where supply remains constrained price growth will follow.”

So the question then is: what type of property should I buy?

Demand for houses will outstrip supply. Simple economics tells us that when demand exceeds supply, there is an increase in price. Unless Europe explodes, (which I’m sure Germany, France etc won’t let happen, future blog post ) or sentiment on the global economy remains incredibly low for many years to come, (unlikely) then houses prices will increase.

What about apartments then? Surely the massive supply we will soon have in one/two bedroom apartments in the city and docklands (from developments in the pipeline) will mean their prices will remain flat for at least a little while. Right?

Not exactly. The reason I say this is because Planning Minister Matthew Guy has recently proposed to expand Melbourne’s CBD, proposing a Manhattan-style landscape. With this will come the need for much more apartments as higher density living will be the only way to secure accommodation.

But what if the plans are scrapped?

Then, if developments continue, the supply of apartments in certain areas, namely Southbank & Docklands will exceed demand. It isn’t possible for the entirety of Victoria to have the perfect balance of demand and supply of housing. Which is why location, as always, is so important.

What also is interesting is the large crowds that auctions have been receiving. Last weekend’s clearance rate was 59% which is a far cry from the same weekend last year, however, the large crowds go to prove that there are plenty of buyers out there waiting for the right time. It may be a rate drop, it may be slightly lower prices or it could be personal circumstances. Whatever it is, it will only be a matter of time before the crowds start buying. The subdued market of 2011 has passed us by and savings has outstripped spending. If buyers begin to bite in 2012 we all must be ready.

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