The Melbourne suburbs leading the property market rebound

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Key points

  • Fewer property listings and strong migration have pushed up house and unit values across Melbourne.
  • The price rebound could be short-lived, experts warn, given interest rate rises.
  • Some unit values have suprassed previous price peaks, CoreLogic data shows.

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Unit prices are back to record levels in a string of Melbourne suburbs as the property market rebound gains pace, defying the uncertainty caused by consecutive interest rate hikes.

Melbourne property values lifted 1.6 per cent over the three months to April, but house and unit medians in some suburbs have climbed at quadruple the rate, CoreLogic data shows.

Unit values in Atlona and Altona North have reached record highs, after rebounding more than 7 per cent over the three months to April, to respective medians of about $692,300 and $751,800.

East Melbourne and Brighton East were among five other suburbs where medians surpassed previous peaks, after values jumped more than 5 per cent over the three-month period.

House values also rose in expensive inner and south-east suburbs, increasing 7.9 per cent in Caulfield, 7 per cent in Caulfield North and 6.3 per cent in Mont Albert – but were still down year-on-year.

More buyers competing over fewer properties for sale has led to rising values.Credit: Peter Rae

CoreLogic Australia head of research Eliza Owen said the rise in values was due to more buyers competing for fewer homes, as the population grew amid a drop in homes for sale and new housing supply.

“Melbourne is getting the population boost it would have gotten during the pandemic if the city wasn’t in lockdown,” Owen said. “It’s really the growth cycle Melbourne missed out on during the pandemic.”

However, Owen expected the pace of growth to slow as the cumulative effect of a dozen interest rate hikes would take “a little steam out of the market.”

Melbourne dwelling values currently sit 9.6 per cent below their early 2022 price peak.

Melbourne’s population is growing thanks to a return in migration.Credit: Chris Hopkins

Kay & Burton Stonnington’s Grant Samuel said there had been increased demand from overseas buyers for houses in Caulfield and Caulfield North.

“[It’s] the international market, that’s been driving the market substantially,” Samuel said. “A lot of people want to come to Australia because it’s such a liveable country, so people are arriving all the time wanting to buy – because they can.”

The rebound in values is welcome news for vendors like Grace and Jim Tsembas. The couple is selling two investment units in Sunshine which they, along with their family, had previously lived in. Unit values in the suburb jumped 7.2 per cent over the past three months, but are still down year-on-year.

Grace and Jim Tsembas who are selling their investment units in Sunshine, where values are up 7.2 per cent.Credit: Jason South

However, they were more motivated by personal timing than the market rebound, as they are selling up to help fund a new family home they are building in Avondale Heights.

“We haven’t paid any attention to the market, and that may sound a bit naive,” Mr Tsembas said. “But I’m a bit of a realist and I think it’s all relative – we’re [building and selling] in the same sort of market, so essentially we’ll end up in the same place.”

Their sales agent Peter Travlos, of Ray White Taylors Lakes, has noticed an uptick in buyers activity since April, particularly for properties priced under $600,000, as the borrowing capacity of buyers declines with each rate rise.

“ It’s a much easier bracket for people to get money from the banks, as they’re more comfortable to lend at that level,” Travlos said.

“The majority of buyers we’re seeing for units are first home buyers, but there are also some downsizers that have bigger properties that are 40, 50 or 60 years old, and they’re not in a position to renovate it or look after the land.”

Some would likely be cash buyers, with data from PEXA this week revealing 21.3 per cent of Victorian properties were purchased mortgage-free last year.

Westpac senior economist Matthew Hassan said downsizers and overseas buyers likely made up the bulk of cash buyers. While such buyers would be unaffected by rising mortgage rates, they were not driving the market rebound.

Population growth and the limited number of homes for sale were the key factors, Hassan said, adding that the strongest growth had occurred in areas that experienced large declines in the downturn.

However, he warned such gains would be difficult to sustain, given increases to the cost of living and the cash rate, now at an 11-year-high.

“It’s going to throw a bucket of cold water over the market,” he said.

He added that competition for homes was also likely to ease as more homes hit the market. While he did not expect to see a sizeable lift in distressed listings, as mortgage rates climb, that could change if the labour market weakened.

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