Melbourne property now ahead of the pack

If you’re moving to Melbourne, you might be thinking of investing in local property. But before placing your bets, it would pay to be informed and keep an eye on the capital growth of local real estate.

Having a glance at the figures will show that the rise and fall of housing values has been playing out somewhat like a race. For a large part of 2015, Sydney was well ahead in first place, recording unparalleled escalations in housing values. Melbourne had trailed behind with growth that trumped other regions, but was not exactly within short grasp of its rival city.

CoreLogic RP Data’s quarterly review said that the median house price in Sydney rose by a staggering 19.8 per cent in the 12 months to July 2015. This figure was 12.3 per cent for Melbourne; still a great figure, but unable to match the Harbour City.

While Sydney has hogged the podium for some time, 2016 is a whole new lap, and things are set to change.

Going for broke

Recent figures reveal that Melbourne real estate growth could be pulling ahead of Sydney in 2016. A February 1 release by CoreLogic RP Data shows that in January, the Melbourne median dwelling price rose to $595,000. This is a 2.5 per cent monthly increase, indicating that there could still be power in the hind legs of local real estate.

However, what’s really stunning about the result is that it pushes year-on-year growth in January to 11 per cent, actually inching past Sydney’s annual increase by a margin of 0.5 per cent. Furthermore, Melbourne had total gross returns of 14.5 per cent in this period, again, barely coming out ahead of its rival by 0.1 per cent.

This means that if you’re looking for somewhere to live in Melbourne, you can buy confidently, knowing that you’re committing money towards Australia’s potentially hottest market for 2016. You could be positioning yourself on track to make great capital gains whether you’re buying as an investor or owner-occupier.

Fatigue – for now

Needless to say, recent figures are certainly encouraging for those moving to Melbourne and wanting to make a profit from their property. However, this momentum is unlikely to persist over the entirety of 2016; even the most able-bodied thoroughbreds get worn out. CoreLogic’s quarterly review indicates that growth is already significantly slower now compared to the first half of 2015 when the quarterly value change was 6.5 per cent.

However, this is something to be entirely expected. Property values move in cycles and for Melbourne, the peak might almost be in sight. Instead of taking it as a sign of a burnt out racehorse, see it as one that is merely catching its breath for the next stretch.

According to the City of Melbourne, the number of local residents is forecast to jump by a healthy 3.2 per cent every year until 2030, pushing the municipality’s total population to 202,000. The jobs market is also predicted to expand 2 per cent annually over this period. This is a reflection of the high quality of life and desirability of staying in Melbourne, which should ripple out and increase values across the entire city.

In these conditions, it’s almost inevitable that demand for housing will begin its climb, and real estate price growth will kick back into acceleration once again. Furthermore, the Reserve Bank of Australia’s recent decision to leave the cash rate at 2 per cent will help ensure that home loans remain relatively affordable and demand for property high. This will help to leave some juice in the tank for the city’s coming sprint.