Melbourne’s Property Market Analysis and Prospects

Melbourne’s Property Market Analysis and Prospects:

Thanks to the rapid development of the Asian region and Australia’s well-formed regulatory system, the Australian housing market has been developing steadily and rapidly over the past few decades. Although there have been many voices of concerns on the market this year, Australia’s stable investment environment and rising house prices and rents still make Melbourne an attractive destination amongst global investors.

Industry status Analysis:

Currently, the Reserve Bank has kept the interest rates unchanged. At present, the historically low 1.5 per cent interest rate is based on stimulus measures taken from concerns about a sharp economic downturn after the end of the mining boom. Due to the limited development of Australia’s large-scale industries, this low loan interest rate and relaxed credit environment have prompted the influx of funds into the real estate industry, resulting a rapid increase the price of the houses in the market.

In recent years, two main issues of policy concern are: about housing affordability where measures have been taken including stamp duty and land tax adjustment; on the other hand, banking ‘credit crunch,’ bought by overheating property market and countermeasures such as bank credit contractions by Australian Prudential Regulation Authority (APRA). As Australia does not have an industry that can fuel economy as mining and real estate industry the central bank has been hesitant with raising interest rates. All the measures can be interpreted as ‘de-risking,’ in response to the fear of economic risks created by an overheated property market and facilitate the steady and rational development of the industry, rather than trying to curb the development of property market.

Everland’s Outlook:

Melbourne’s unprecedented population growth has underpinned a buoyant state economy, with often strong economic growth. The stronger rate of population growth is increasing the spending on infrastructure and other services. All of these factors will be naturally translated into demand for housing in the medium to long term. Statistics from the Australian Bureau of Statistics (ABS) showed Melbourne has the nation’s largest and fastest population growth. If growth continues at this rate, Melbourne’s population would pass 5.4 million by 2025, overtake Sydney by mid-2030s becoming the biggest city in Australia. Even though Melbourne City might experience apartments supply peak during this year and next year, apartment oversupply does not exist. BIS Oxford Economics recently reversed its earlier predictions that Melbourne will suffer a surplus of apartments and believed Melbourne thanks to its faster-than-expected population growth will have an under-supply of about 2000 dwellings in 2018.

Everland’s View:

Everland believes the real estate market is returning to rational growth. At this stage, the turmoil in the market is often amplified by pessimism. For example, the site selection operation of individual projects is unfavourable, and a series of negative news such as the decline in selling price and delivery default are often misinterpreted as oversupply without a complete analysis. However, in Everland’s view, the market is still in short supply of projects with mature regions, well-designed and excellent construction quality; consumers will be willing to invest more if they find the ideal product. Property developers should plan, invest rationally and control operational and capital risks in the long run, so as to grow together with Melbourne and witness the legend of urban development.

Tim Chang

Michael Xie

Find us on social media