Current Sentiment in the Melbourne Residential Sales Market

Understanding the main demographics that buy property is essential to interpreting the market:?

• Apartments & Units: Typically purchased by first-home buyers and investors.?

• Townhouses & Houses: Commonly bought by professional couples and families with dual incomes.?

Apartment & Unit Market Overview?

Unfortunately, the apartment and unit market has faced significant challenges over the past 1–2 years. One major factor has been a wave of investors offloading properties. While some first-home buyers have taken advantage of these opportunities, it has not been enough to fully counteract the downward trend.?

Key Headlines from the Past Year:?

• The Melbourne suburbs where investment properties are selling at a loss.?

• Rental crisis looms as investors flee Victoria’s property market.?

• Victoria sees record fall in rental stock as investors leave the state.?

• Decline in rental bonds shows investment property sell-off rate in Victoria.?

This surge of investor sell-offs has increased the availability of apartment and unit stock. However, the primary buyers left—first-home buyers—are limited by borrowing capacity. Consequently, we have seen prices in some areas decline by 10–15% over the past two years, resulting in many sellers facing net losses.?

Older apartments built before 2000 often come with the advantage of smaller body corporates and lower associated costs. These properties typically have fewer compliance requirements and more manageable owners corporation fees. As a result, investors who own older apartments are less pressured to offload their properties and tend to hold onto them for longer periods. Additionally, we have seen growth in the value of older apartments due to the limited number coming to market, coupled with first-home buyers often preferring them for their larger layouts and lower ongoing costs.

In contrast, newer apartments constructed post-2000 face higher costs related to compliance and owners corporation fees. Investors who bought off the plan in these more recent buildings are increasingly motivated to sell due to these financial pressures. The higher expenses linked with maintaining newer properties make them less attractive for long-term investment compared to older buildings, leading to more frequent sales from this segment of the market.

Townhouses & Houses?

This segment has shown more resilience, driven by continued demand from professional couples and families with dual incomes. These buyers are seeking homes that offer both space and lifestyle benefits.?Additionally, we are seeing many people, especially the baby boomer generation, choosing to stay in their homes longer. This trend has led to a significant decrease in the number of suitable family homes entering the market in 2024. As a result, prices in this segment have remained resilient throughout the year, sustained by limited supply and consistent demand from buyers.?

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Market Trends & Projections?

It’s important to look at broader trends to anticipate the market’s future direction. We’re observing:?

• Preference for Location and Space: Buyers and renters alike prioritize location, considtion, and space. If potential buyers cannot purchase in their desired area, many choose to rent instead.?

• With a significant amount of older investment stock entering the market at prices below current construction costs, it will take time for this inventory to clear. Only after this happens can developers achieve the square meter rates needed to profit from new builds.?

• Boomer generations are consolidating their investments and re-investing that money into their principle of place residence where there are no land or capital gain taxes.?

• Over the past three months, we have noticed a significant rise in the number of first-time investors & first homes buyers inspecting our properties. We anticipate that a new generation of investors will enter the market in the upcoming cycle.?

Conclusion?

The Melbourne residential sales market presents a complex picture. While the apartment and unit segment has faced notable challenges due to investor sell-offs, construction costs, and constrained first-home buyer budgets, townhouses and houses continue to attract interest from higher-income buyers and less of this stock coming to the market. In conclusion, the post-COVID sales market has acted as a reset for property prices, setting the stage for the next cycle. With interest rates likely at their peak, apartment and unit prices having declined, and growth in the townhouse and house market stabilizing, we anticipate renewed growth once interest rates begin to fall. Buyer inquiry is already starting to rise across all residential property types, indicating positive momentum ahead.?