Melbourne suburbs where house values are falling fastest

21 hours ago 3

Home values in Melbourne’s bayside suburbs are falling despite a broader property market upswing, as experts warn that vendors are pricing their homes higher than the market is willing to pay.

While Melbourne’s property market has been gradually rising following three interest rate cuts, Cotality figures show that house values in the Bayside area have fallen by 3.4 per cent in the past month, and by 2.1 per cent over the past three.

Cotality head of research Eliza Owen said the figures were not what she would expect at the start of a new growth cycle. “Usually, when interest rates are falling and financial conditions are improving, high-end markets would be very responsive to that,” she said.

The RBA reduced its interest rate to 3.6 per cent last month, the third cut this year from its recent high of 4.35 per cent. More cuts are expected.

Owen said affordability issues were a factor, noting that Bayside’s median house value of almost $2,165,000 was nearly double that of Keilor ($1,147,000), where Melbourne home values are growing fastest.

“Affordability has vastly improved at the middle of the market, where it rose 1.4 per cent over the same period, but there is still a big disconnect between what households can afford and where the Bayside market is sitting,” she said.

Other areas where values have not risen in response to lower rates include Port Phillip, just to the north and also on the water, where the median house value is 0.7 per cent lower than three months ago, and at the other end of the bay, the Mornington Peninsula, down 0.5 per cent over the same time frame.

Buyer’s agent Nicole Jacobs, managing director at Cohen Handler in Victoria, said it was less affordability caps and more that vendors were “getting ahead of the market, when they need to be meeting the market”.

“Every vendor thinks their property is worth more than it is … but it is very important that vendors don’t price their property based on what they need to move forward, but on what the market is asking,” she said.

With turnkey properties in high demand, Jacobs said buyers were “being very particular” about what they wanted.

House values in Melbourne’s Bayside region have fallen the most over the last month and three months, Cotality data shows.

“Everyone wants a turnkey house; very few people are looking for a project,” Jacobs said. “Buyers are very much about making sure the property meets their needs, there is no fear of missing out – another one will come along.”

Premier Jacinta Allan unveiled draft maps of the proposed development boundaries and height limits of high-rise apartment buildings in the Bayside area on Wednesday as part of her plan to build 300,000 homes within 800 metres of transport hubs.

The proposal – which includes building towers up to 12 storeys in Brighton’s Church Street, Bay Street in North Brighton and Bay Road in Sandringham – is facing strong opposition from locals, who have accused the state government of “trashing our suburbs” and suggested it should “be investing in infrastructure in the outer suburbs and unlocking land”.

But Angie Zigomanis, Quantify Strategic Insights head of data and insights, believes that over the longer term, rezoning land for medium and high density housing could lift house values in the sandbelt suburbs.

“The land becomes more valuable when a developer can come in and build more units or townhouses on it,” he said.

While in the long run, building more apartments could keep a lid on unit prices and introduce more affordable housing options in the Bayside area, the remaining houses would “become more expensive”, Zigomanis said.

“This has happened in Sydney, where you get 10 or 15 home owners in these town centres who band together and can sell their house for twice the price because you can now build 600 apartments on it,” he said.

But for now, bayside buyers and sellers face a falling market coming into the spring selling season, where some of the tailwinds for property values elsewhere are less relevant.

The fast-tracked expansion of the federal government’s First Home Guarantee Scheme, which comes into effect on October 1, will help bolster values – but in the low to middle market, Owen added, rather than the upper end.

“The expansion of that first home guarantee could push demand higher at the lower end of the pockets,” she said. “There is a lot more demand among first home buyers that will reflect price growth in lower to medium segments of the market.”