What’s Ahead for Melbourne House Prices

Over the past couple of years, Australian house prices – and Melbourne house prices especially - skyrocketed due to the increased demand and lacking supply of properties. With an interest rate rise on the horizon, house prices are likely to change again, leaving those looking to buy questioning whether now is the right time. Here is what we’re expecting the property market in Melbourne to look like this year and how you can get into the market.

The good

Property prices rose in every Australian capital city in the last quarter. In Melbourne, they rose by 3.9 per cent. The good news for home buyers and investors is that Melbourne house prices will begin to relax from the abnormally high prices we have seen as of late. While prices aren’t necessarily expected to drop, they won’t be rising at the accelerated pace of previous years. If 2022 brings increased house listings, we would expect the frantic scrambling and sense of FOMO (fear of missing out) to reduce as well. With more supply and reduced demand, prices will not be as competitive as they have been. In February alone, Melbourne didn’t record any house price growth due to rising mortgage rates, while the median house price remained at $998,356. The slowing of price increases in Melbourne is potentially attributed to less government stimulus, worsening affordability, rising fixed-term mortgage rates and a slight tightening in credit conditions. Despite the housing prices starting to slow, Melbourne mortgage brokers believe there is still some cause for concern.

The not so good

With the federal election looming, further intervention by the banking regulator, and increased interest rates, is on the cards. This means the property market may be more challenging to enter in a different way than we’ve seen in the previous years. “(Melbourne and Sydney) are most sensitive to even minor intervention by the banking regulator,” says Real Estate Researcher and SQM Founder Louis Christopher. Multiple lockdowns, thousands of business closures, plummeting job availability, the exodus of tens of thousands of residents and ballooning state government debt could all come to a head in the second half of 2022. However, when the Reserve Bank lifts the cash rate, home buyers won’t be able to borrow as much, which could constrain how much they can bid at auction and push prices down. The rising interest rates will reshape the affordability of mortgage repayments, leaving some recent home buyers under financial strain. The low interest rates and limited supply of houses on the market over the past couple of years set house prices sky-high. As we move through the price correction into 2023 and 2024, once rates stabilise, we do get some improvement in affordability. It’s probably only going to be if and when an easing cycle materialises that we’ll see an affordable market.

Our home buying tips

With Melbourne house prices continuing to grow, potential buyers may wonder whether it’s best to wait for the market to ‘crash’ before purchasing. Our mortgage broker Melbourne team has put together some advice for those looking to buy.

Be patient but don’t hesitate

Many home buyers hesitate before going into the housing market as they wait for ‘better conditions.’ Inovayt Broker and Business Developer Marty Vidakovic says, “If you can get in, get in!” By waiting, Marty advises, “It will mean a steadier market to buy into. However, I believe it’s always the right time to buy into the Australian property market.” This isn’t to say you should purchase any house you see in your price range, but don’t hesitate on the right one. Be patient in your search, but don’t be afraid to put in your offer!

Consider your budget

With inflation and interest rates set to rise, considering your budget is important in deciding whether you’re in a position to enter the Melbourne property market. If you haven’t already, create a budget that maps out all your monthly income and outgoings.

Choose your area carefully

Before purchasing, don’t simply opt for anywhere you can afford or, on the flip side, your dream suburb, which may be overpriced. Research the growth in specific suburbs and the trajectory these suburbs are on for the future. Is there more infrastructure being built? Is it in an area close to schools, shops, and public transport? What’s the crime rate? “Property in good, established areas will always be a solid investment in good time,” Marty says.

It’s ok to go over

Many of us have been advised to have a figure in our minds that is the maximum limit for bidding or placing an offer. However, stretching your budget a little may pay off in the long run when it comes to property. When it comes to spending a little over budget, Marty's advice is, “In 15 years’ time, you won’t care if you stretched and paid top dollar for a place, because property will do what it always does - increase in value over the long term.”

Work with an expert

Another mistake many of us make is trying to obtain a loan on our own. Usually, we go through the banking provider that the rest of our finances are through, as we believe it’s the most convenient for us. Although this may feel right, working with a mortgage broker will help you find the best lender for the best price and rates. Our mortgage broker Melbourne team of experts has access to deals and rates unavailable to the general public, meaning you could be missing out on some significant savings if you try to obtain a loan on your own. The Melbourne property market is constantly rising and fluctuating, making it difficult for potential home buyers to know whether it’s the best time to enter the market or not. With interest rates due to rise in 2022, the property market is set to slow from the excessive prices we’ve seen recently. If 2022 is the year you want to own your own home, book an appointment with one of our mortgage brokers.