What’s causing Melbourne’s slowed property growth?

Melbourne is often seen as one of Australia’s strongest property markets. However, according to the latest PropTrack data, the city is experiencing a slump in property value growth.

Major cities like Melbourne and Sydney have the benefit of a strong job market, high migration, and the reputation of being some of the world’s most livable cities.

However, while Sydney and the other major cities have continued to experience significant growth, home valuations in Melbourne have reportedly seen a slowdown.

According to the data, for the first time in 14 years, Brisbane’s median home value overtook Melbourne’s in March, becoming the second most expensive city in Australia, behind Sydney.

While Brisbane saw a 4.4 per cent median house value growth over the quarter, Melbourne climbed just 0.1 per cent. Meanwhile, unit prices in Brisbane jumped 7.4 per cent, with Melbourne experiencing a decline of 0.1 per cent.

To put that in perspective, Brisbane’s house value reached $951,000 compared to Melbourne’s $912,000, while Brisbane’s unit value was $633,000 against Melbourne’s $619,000.

Karen Dellow, PropTrack’s senior audience analyst, said on the data: “This is not a new trend. Melbourne’s year-on-year growth has been minimal at 0.3 per cent for houses and 0.2 per cent for units, whereas Brisbane has experienced house value growth of 14.7 per cent and unit growth of 20.3 per cent.

“Both Adelaide and Perth have also experienced strong growth over the past 12 months, suggesting that house and unit prices in these cities could surpass Melbourne’s if these trends continue.”

There are a variety of reasons why the city is experiencing a slump in house prices. According to PropTrack, hangovers from the extended pandemic lockdowns may be one of the issues, as Melbourne was affected more than any other city.

“Melbourne lost more of its population to interstate migration and faced closed borders, which led to many investors leaving the market due to low demand for rental properties in the inner city,” said Dellow.

“While cities less affected by lockdowns, such as Brisbane, Adelaide, and Hobart, attracted interstate migrants and boosted their property markets, Melbourne (and to a lesser extent Sydney) struggled to recover from the pandemic’s impacts.

“Melbourne’s slower recovery has made sellers more hesitant to list their properties, further slowing down the market’s recovery. According to realestate.com.au’s most recent Residential Audience Pulse survey, only 19 per cent of Victorian respondents considered it a good time to sell a property, compared to 37 per cent in Queensland and 25 per cent in New South Wales.”

Where sellers stand to lose, buyers are reaping the benefits. The data revealed that in June, more than half of the properties sold in Melbourne went for the asking price, more than one-third sold for less, and just 14 per cent sold for above the asking price.

Meanwhile, cities like Brisbane and Adelaide saw 77 per cent of sales exceed the asking price.

However, Dellow said that this isn’t all doom and gloom for home owners, as there are still positive signs of recovery.

“Despite this, it does not indicate that Melbourne’s property market is faltering. Buyers and sellers are still active, and most market indicators remain positive. It is more likely that Melbourne is simply undergoing a period of adjustment, with prices normalising after decades of strong growth,” Dellow said.

[Related: Dwelling price growth at 8% annually]

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

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