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Melbourne - Affordable & Liveable Property Guide 1st Half 2018

Affordable Suburbs - Melbourne

The Melbourne City Local Government Area median house prices experienced a 1.3% growth and unit median prices grew by 7.9% from 2016 to 2017/2018*. The majority (79.5%) of suburbs in greater Melbourne experienced double digit price growth, whereas 16.8% experienced single digit growth and only 3.7% had negative growth. This points to the wide scale decline in affordability across greater Melbourne. Property buyers will be pleased by the existence of affordable options in the midst of continued price growth, across suburbs in the north-west for houses and south for units. At the same time, rental prices in the LGA have trended upwards for houses whilst remaining stable for units.

Table 1. Melbourne’s top performing suburbs in the 1st half of 2018Table 1 - Melbourne.PNG

Housing affordability in Victoria has declined over the past 12 months to December 2017^. Proportion of income to meet loan repayments increased by 33.4% and although the number of first home buyers increased by 12.6%, this is a decrease when compared to the September 2017 growth (32.2%).  Table 2 provides the percentage of suburbs that is available for house buyers, based on particular price range.

 Table 2. Accessible suburbs by price rangeTable 2 - Melbourne.PNG

Liveable Suburbs - Melbourne

2018 sees liveability added as a new criterion included in our methodology. This ensures that not only does our report highlight affordable suburbs but also those that have high liveability factors. This provides us with insight to the ‘cost of liveability’ and how much home buyers need to be prepared to pay. It also serves as a warning to local and state governments on the rising costs of liveability. It also provides focus areas for further development to create a balanced opportunity for residents, regardless of their income bracket.

Affordable suburbs (those with a maximum affordable property sale price of average state loan, plus a 40% deposit) exist. There are 3 suburbs that fell within this category: Dallas, Meadow Heights, and Coolaroo. However, these suburbs fail to meet the liveability criteria set. To do so, 60% for houses and 40% for units needed to be added to the average state loan. Thus, the average cost of liveability (based on average percentage difference of premiums added to average state loan) in Melbourne is 10%. This is lower than the cost of liveability in Sydney (18%) and surprisingly Hobart (16%).

Affordable & Liveable Suburbs - Melbourne

Considering a combination of key property criteria such as: property trends, investment potential, affordability, project development and liveability factors; the tables below show the suburbs that should be on every property watchers list.

Table 3. Affordable and liveable suburbs - HousesTable 3 - Melbourne.PNG

 Table 4. Affordable and liveable suburbs - UnitsTable 4 - Melbourne.PNG

The Melbourne rental market has shown positive growth in house and unit median rental prices over the past 12 months leading up to December 2017. In the first half of 2018, 3 bedroom houses recorded annual rental price changes of 2.6%, while rental prices for 2 bedroom units have remained stable. This combined with overall declining and low vacancy rates of 2.2%, reflects very strong demand for rental properties in the Melbourne market. These conditions suggest that the Melbourne market is still absorbing the supply of residential accommodation. This is great news for existing owners, and signals that now is the time for new home buyers and investors to enter the market.

The 1st half of 2018 is set to see $15.2B worth of infrastructure, mixed-use, residential and commercial projects. Queens Place is a mixed-use development project ($750.0M) and is set to deliver 1,700 units over two 80-level towers. The Paragon Apartments project ($200.0M) is the first of its kind and involves 48-storeys, housing 227 luxury units and a 3-storey high urban forest. In total 6,806 units, 24 townhouses and 47 houses will be added in the 1st half of 2018, and over 147 hectares residential land redeveloped.

Methodology

This guide analyses all suburbs within the greater Melbourne area. The suburbs chosen as the most affordable and liveable hotspots are within a 20km radius of the CBD. In selecting hotspots, the below factors and methodology were considered:

  • Property trends - suburbs will have a minimum of 20 transactions for statistical reliability purposes, with positive price growth over the past 15 months (2016 to Q1 2018*).
  • Investment - suburbs will have on-par or higher rental yield than Brisbane Metro, as well as on-par or lower vacancy rates (as of December 2017).
  • Affordability and liveability - suburbs will have a median price below the maximum affordable property sale price, based on the average state loan. In this report 60% for houses and 40% for units were added to the average Victorian home loan, which was $410,580 as at December 2017^^. Key liveability factors included ensuring the suburbs have a low crime rate, availability of amenities were within a 5km radius (i.e. schools, parks, shopping centres, and health care facilities), and an unemployment rate that is on par or lower in comparison to the state average (as determined by the ABS Census 2016).
  • Project development - suburbs will have a high total estimated value of future project development for the 1st half of 2018**. This ensures sustainable economic growth, having a positive effect on to the property market.

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PRD Affordable & Liveable Property Guide 1st Half 2018 - Melbourne.pdf