The slowdown in our property market has been a result of tighter lending standards and lower investor and overseas activity through regulatory crackdowns on both investors and foreign buyers. Adding to the market slowdown were the findings of the banking Royal Commission, which further eroded consumer confidence and trust.
Since 2012 Melbourne house prices have boomed by more than 70%.
“The current slowdown and correction in prices is quite normal after a period of strong price growth.”
Before you know it house prices will be surging upwards again for the second half of the greater real estate cycle.
With the low market sentiment we are currently experiencing, it’s possible that prices may decline another 5% to 10% until the early part of 2019 before normalising.
The banks main revenue stream and business is lending money with property as security. The odds are that the banking Royal Commission will soon fade into the background and the banks will find a way to get back in on the action and lending will start expanding once again.
“Melbourne is growing by 125,000 people a year.”
This is equivalent to adding a city almost the size of all the suburbs in Manningham to Melbourne every 12 months.
“This is enormous growth and requires a lot of new housing supply every year.”
Why is Melbourne such a popular destination for so many people?
After a little research, I discovered that apart from the well-known fact that Melbourne repeatedly wins the most liveable city in the world, look at what else Melbourne rates very highly on:
- Melbourne came in at No. 4 in the world in Time Out’s City Life Index for 2018, a ranking of the world’s most exciting cities. The three cities ahead of Melbourne were Chicago, Porto in Portugal and New York City.
- Melbourne also beat Sydney in Condé Nast Traveller’s Top 10 world cities. International tourists named Melbourne the world’s third-best big city in the world. Sydney came in sixth. The two cities ahead of Melbourne were Tokyo and Kyoto in Japan.
As Melbourne continues to swell in size – population and popularity – demand for property will continue to remain strong.
The long term fundamentals of strong economic growth, population growth, low interest rates and strong employment growth will support demand for housing over the medium term. In addition, a weaker Australian currency makes property much more affordable to foreign buyers.