The real estate market in struggling big cities is expected to recover next year due to high foreign immigration.
Melbourne, Australia’s second-largest city after Sydney, has performed poorly in 2024, with house prices falling 2.3 per cent in the year to November, as a result of the $975 land tax levied by the Victorian government to investors.
This came as house prices soared by double digits in Perth, Brisbane, Adelaide and parts of western Sydney.
That has made Melbourne a better value property market, with $600,000 still to buy a house with a backyard relatively close to the water and train line.
My Housing Market chief economist Dr Andrew Wilson predicted Melbourne would likely welcome even more foreign migrants than Sydney next year, boosting its housing market.
“I hope that gets ahead of New South Wales sooner rather than later,” he told Metropole Property Strategists founder Michael Yardney in a podcast.
“Victoria is usually the leading state in net overseas migration, but at the moment it is behind New South Wales.”
During the last financial year, 132,859 net foreign migrants moved to Victoria compared to 142,473 who went to New South Wales, Australian Bureau of Statistics population data showed.
The housing market in struggling big cities is expected to soar next year due to high foreign immigration (pictured, a house inspection in Melbourne)
Australia’s two most populous states were home to 61.8 per cent of the foreign influx, as skilled migrants and international students flocked to Sydney and Melbourne.
Sydney is becoming increasingly unaffordable and in the year to June, a net 30,865 New South Wales residents moved interstate, while Queensland welcomed 29,910 new people from other parts of Australia.
But Victoria’s interstate migratory population increased by 664, giving it a net population increase of 133,523 when overseas migration is taken into account.
By contrast, New South Wales had a smaller population increase of 111,608 people, and the state had the largest interstate exodus but the largest influx of overseas migration.
“Victoria, overall, remained the largest beneficiary of net migration,” Dr Wilson said.
“That’s positive in terms of reversing what has been a weakened housing market in Victoria or Melbourne.”
Yardney predicted Melbourne prices would rise in 2025 and 2026 to make up for a poor 2024.
“Melbourne’s property market has not performed as strongly as other capital cities in recent years, but Melbourne property values are expected to catch up over the next year or two,” he said.
Melbourne still has affordable suburbs with CoreLogic data showing median prices below $600,000, including Frankston North at $591,214.
Victoria’s population growth rate of 2.4 per cent was also significantly higher than New South Wales’s 1.7 per cent level and even surpassed Queensland’s 2.3 per cent increase.
Only Western Australia had a higher level of growth, at 2.8 percent.
Melbourne’s median house price of $923,422 is still out of reach for a middle-income person with a purchase of $100,017 alone.
But it still has affordable suburbs with CoreLogic data showing median prices below $600,000, including Frankston North at $591,214, with prices stable over the year as values fell across most of Melbourne.
The suburb 54 kilometers from Melbourne’s city center is considerably cheaper than other equivalent suburbs in Brisbane, including Caboolture, where $738,458 is now the midpoint.
In Sydney, houses in the city’s outer southwest cost around $1 million and only $600,000 buys a one or two-bedroom unit in the outer suburbs.
The Central Coast, an hour’s drive north of Sydney, is also expensive, with North Gosford having a median house price of $901,661.
Property group Domain forecasts price growth of 3 to 5 per cent in Melbourne next year, which would still be weaker than Sydney’s 3.5 per cent rise this year.
It would still be well below Brisbane’s 12.1 per cent rise, Adelaide’s 14 per cent rise and Perth’s phenomenal 21 per cent rise.
Yardney said Melbourne’s suburban rail loop and strong population growth made it a good investment, despite Victoria’s hated $975 investor tax.
“Melbourne has been constrained by a number of factors that are transitory in nature, but Melbourne’s long-term fundamentals remain strong, with a robust economy, strong population growth that will outpace that of Sydney and significant new infrastructure in the pipeline, which which makes it one of the most livable cities in the world,” he stated.
“Despite the current difficulties, there is significant opportunity in the Melbourne property market.”