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Melbourne’s housing market hits speed bump as prices start to fall

5 mins read
melbourne house prices to drop

Melbourne has been one of the most desirable places to own a property in Australia for years. With a booming economy, a rich cultural scene, and a diverse population, it’s no surprise that investors flocked to the city. However, the COVID-19 pandemic has caused a significant shift in the real estate market, with the housing market getting a severe hit as prices start to fall.

The pandemic has disrupted the country’s economic growth, with businesses closing down, and many people losing their jobs. As a result, people are becoming more cautious with their spending, and the demand for homes has decreased. The uncertainty caused by the pandemic has made many potential buyers reluctant to invest in real estate, causing a dip in property prices across Melbourne.

What Caused the Dip in Melbourne’s Housing Market?

The drop in Melbourne’s housing market can be attributed to several factors:

  • COVID-19 pandemic: As mentioned above, the pandemic has caused a significant shift in the real estate market.
  • Job losses and reduced incomes: Many people lost their jobs or were furloughed during the pandemic, which made it difficult for them to afford a mortgage or to buy a home.
  • Reduced immigration: Melbourne is home to a diverse population, and many overseas buyers and immigrants have contributed to its booming real estate market. However, travel restrictions have made it challenging for international buyers to invest in local properties.
  • Tightened lending rules: The Australian Prudential Regulation Authority has added further restrictions on lending to borrowers to combat surging home prices.

How Is the Market Performing Right Now?

The current market conditions in Melbourne are a buyer’s market, meaning there’s more supply than demand. With more properties for sale than there are buyers, sellers may find themselves having to reduce their selling price to make a sale.

According to Domain’s House Price Report, Melbourne’s median house price fell by 2.5% in the June quarter, bringing the annual change to negative territory. Melbourne’s unit market has also experienced a similar trend, with the median unit price falling by 4.4% over the same period.

What Does the Future Look Like for Melbourne’s Housing Market?

The future of Melbourne’s housing market remains uncertain, with many factors at play. While the lifting of lockdown restrictions and a recovery of the economy could stimulate the market, other factors may keep prices suppressed for an extended period.

As the government continues to roll out its COVID-19 vaccination program and open its borders, it may prompt investors and buyers to re-enter the market. However, with international travel expected to remain restricted for some time, the market may not see a significant rebound until borders re-open fully.

Tips for Buying a Property in Melbourne’s Market

Are you looking to buy a house in Melbourne but unsure where to start? Here are some tips:

  • Choose your location carefully: Do your research on Melbourne suburbs to find the areas that suit your lifestyle and budget.
  • Get your finances in order: Determine how much you can afford by working out your budget and seeking pre-approval for finance.
  • Be ready to negotiate: As the market favours buyers, you may be able to secure a healthy discount off the listed price.
  • Get a building inspection: Ensure you’re investing in a property worth buying by arranging for an inspection by a qualified professional.

Conclusion

The Melbourne housing market is currently experiencing a downturn, with prices starting to fall. While the reasons for this decline are numerous, the COVID-19 pandemic is the significant contributor. Despite the current market conditions, this could be an excellent opportunity for buyers to invest in their dream home at reduced prices. By doing your research, getting pre-approval for finance, and being ready to negotiate, you can secure a property that meets your budget and lifestyle.

If you’re looking for more information on buying a house in Melbourne, check out our Guide to Buying a House in Melbourne.

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