Melbourne’s affordable suburbs defying decline: Terry Ryder report

Affordable Melbourne suburbs and regional Victorian cities are among Australia’s five “star” growth markets, according to Terry Ryder’s Winter Price Predictor Index report.

The leading property expert also has Greater Geelong — dubbed the location that “just won’t quit” — and Melton among the nation’s top 10 municipalities for anticipated growth.

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Mr Ryder isn’t seeing dramatic price falls predicted by some economists on Victoria’s horizon, with strong state and local economies and borders reopening underpinning housing markets.

“There’s a lot of forecasting from economists that prices are going to be falling quite dramatically; we just don’t agree with those forecasts,” Mr Ryder said.

“If it were to happen that way, it would be unprecedented in Australia.

“The narrative seems to be rising interest rates mean prices would fall a lot, but that’s never happened before so we’re not quite sure why that’s going to happen this time.”

Mr Ryder’s price predictor index method uses sales volumes to pre-empt price movements, with rising sales volumes a proven precursor to rising prices.

The latest quarterly report has found 182 (62 per cent) Melbourne suburbs with rising momentum, down from the record 229 (78 per cent) of the previous survey.

That 182 figure is the fourth highest number of rising suburbs in the seven years of these quarterly surveys of sales activity.

Regional Victoria is described as “the market that refuses to give up” and the City of Greater Geelong the location that “just won’t quit”.

Mr Ryder expected the Commonwealth Games in regional Victoria, across Geelong, Ballarat, Bendigo, Shepparton and Gippsland, to further boost its markets in the lead up to 2026.

In Melbourne, Hume, Wyndham, Whittlesea, Casey and Frankston council areas all have a majority of rising suburbs, “with buyers chasing affordability in an expensive city”.

“I expect we’ll see prices rising still in those more affordable areas but the top end is probably going to come back a bit,” Mr Ryder said of the rest of the year.

He expected Melbourne overall would have a better year than had been forecast by some economists who he believed were too focused on interest rates rising.

International borders reopening and infrastructure spend were strong factors for Melbourne, and he had no reason to believe the sales surge was a rush to beat impending falls.

The city’s property market experienced its first price decline in two years in May, PropTrack’s latest Home Price Index shows.

The value of a typical house slipped 0.25 per cent to $902,000 last month, equating to about $2260 in the first fall the Melbourne house median has had since April 2020.

Melbourne’s median unit price was down 0.44 per cent in May to $605,000, while the overall property figure slipped 0.27 per cent to $785,000.

It comes as the Reserve Bank of Australia has increased the cash rate in both of the past two months, including a steep 0.5 per cent rise to 0.85 per cent at the beginning of June.

PropTrack economist Angus Moore said more buyers could be competing at the most affordable end of the market as borrowing capacity was reduced by rising interest rates.

“We have seen prices go up over the past couple of years and with interest rates rising, affordability will be a constraint for many buyers, and so that might provide some support for more affordable parts of Melbourne and regional Victoria,” he said.

“Many borrowers are going to find their borrowing capacity reduced as the RBA raises rates and that could push them to consider more affordable suburbs or areas.”

But Mr Moore expected prices to continue to decline overall in Melbourne “particularly over the next few months” given how quickly the RBA had raised the cash rate so far.

How far and quickly they fell would depend on how the RBA acted from here.

HockingStuart Melton director Damien Spiteri said his municipality always steadily grew irrespective of what the wider market was doing.

“The Melton market’s always been a cheap market and when economics are tough it’s still affordable,” he said.

“We don’t seem to drop off like our surrounding suburbs because we are on that cheaper end of the scale.”

And there were still plenty of buyers on the hunt in the outer northwest council area, where repayments on a house in the “mid $400,000s” can be cheaper than rent, but some sellers were hesitant to list amid shifting conditions, which were actually adding more into the mix.

“Some people who were going to buy in Caroline Springs or Taylors Lakes will now come back to our territory because cost of living has gone up and they’re justifying the price with a cheaper market,” Mr Spiteri said.

He expected a steady incline in City of Melton for the rest of the year.

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Originally published as Melbourne’s affordable suburbs defying decline: Terry Ryder report