Boroondara - Autumn 2024 Market Update

From the economic fallout of the pandemic and being locked down for longer than any other city in the world, to 13 interest rate rises, the lowest level of consumer confidence in decades, further lending restrictions, and a blanket of pessimistic media coverage, it’s no surprise the Melbourne property market struggled throughout last year. Property values have risen 11% since the onset of Covid, but they are -4.1% below their previous peak in March 2022. The average price of a Melbourne standalone house is the lowest it has been against its Sydney equivalent in around twenty years. While the market appears to have turned the corner, price growth has been slower than in other capital cities. Though it is worth noting that it still remains one of the most consistent performers over the last four decades.

Despite this, the Melbourne, and in particularly the Boroondara, auction market started the year strongly, showing a significant depth of buyers in the market. A tale of two cities, some properties over-performed, while others underperformed. Growing confidence was observed in the $5m-$10m price range, as beautifully presented and renovated family homes, as well as A-grade and investment-grade properties, thrived at auction. With consistent competitive bidding, clearance rates for the family home were regularly over 70% most weekends this quarter. Supply and demand played a significant role in these vendor outcomes, with many areas tightly held and options limited through particular suburbs and price ranges. B-grade properties sat on the market for longer, and C-grade were largely avoided. There were the inklings of a resurgence as buyers looked to be exploring properties requiring work. With material shortages settling down, builders have now caught up with the post Covid backlog and are actively looking for new jobs/clients to work with. Conversely, the rental market showed a bleak outlook as near-record-low vacancy rates, high rent prices, strong demand, and a rising population combined to push the market into a high-pressure cooker environment.

After a period of volatility with both buyers and sellers sitting idle, both are back in the market and appear a lot more decisive. Incredible homes came to market, held back last year due to the uncertain economic climate, and sentiment grew. Stuart Evans from Marshall White Real Estate said, “Interest rates remaining on hold throughout the start of 2024 definitely allowed buyers some confidence to buy knowing they were not going to be hit with several interest rate increases shortly after purchasing. The market now understands the next move with interest rates is likely to be a cut. Most astute buyers know that this is often followed by increasing in buyer activity & property values”.

Peter Vigano from Jellis Craig gave a close up take on this quarter, “Within Jellis Craig there have been 17 sales in Boroondara between $5m – $10m, and 6 sales between $10m – $20m. We saw strong confidence and demand from local buyers, expats and overseas buyers wanting to invest in the area for their principal place of residence due to the demand for elite private schools, tree lined streets and the quality of the amenities. We expect this demand to continue for the foreseeable future”.

While Melbourne’s property market has lagged behind Sydney and Brisbane, there are firm indications that housing and rental values will continue on an upward trajectory. Strong population growth, tight supply, and increased interest rate and inflation stability, all suggest the next stage of the property cycle is a positive one, setting the stage for sustained growth and development in the quarters to come, as homebuyers and property investors re-enter the market. All the major banks forecast property price rises in 2024, ranging from 3-5.5%, while the SQM forecast up to a -3% price fall. Oxford Economics recently forecast very strong price growth for both houses and units over the next three years as Melbourne reverts back to mean long-term growth rates.

As for this next quarter, all signs point to growth, with Stuart Evans from Marshall White Real Estate summing up, “I don’t believe we will see any negative movement in property prices for some time now, with strong demand equalling strong number of properties available. We do often see a heightened level of activity getting closer to the winter months. If we see a decrease in the cash rate later this year prices will start to increase in value in the first quarter of 2025. I’m sharing this opinion with my clients and highly recommending them to buy in 2024 as I believe they will see good steady growth throughout the next 2 to 3 years”.