Victoria delivers strong returns for investors, despite concerns about the future stability of the market
Melbourne had an exceptional year for price growth, recording increases of 11 per cent in the year to July, according to RP Data. The city is second only to Sydney for capital gains over the past 12 months.
The REIV reports auction levels are at a record high, up by 30 per cent on June last year. In certain suburbs, nearly every auction results in a sale – Ashwood clearance rates are at 97 per cent, Vermont South at 94 per cent and Ashburton at 93 per cent.
Both the top end and lower end of the market are benefiting from the current growth wave. Melbourne’s exclusive enclave Toorak has seen a 25.1 per cent increase in values over the June quarter, bringing the median price to $3.04 million, according to REIV data. Meanwhile, Sunshine’s more modest median price is also accelerating, rising by 23.2 per cent to $437,500.
Time on market has also shortened in many suburbs around the city, especially on the Mornington Peninsula. In Mount Martha, days on market have fallen by 46 days over the past year, to a low of 36 days, the REIV reports.
Despite these positive indicators, some analysts warn the market may weaken. Tim Lawless from RP Data points out Melbourne has the lowest yields of any capital city, even as prices rise. These trends may deter investors, leading to lower buyer activity.
Meanwhile, NAB believes growth in the city will slow to a snail’s pace over the next two years. Their forecasts show prices rising by just 3.1 per cent in 2015 and two per cent in 2016 due to slow economic conditions and high levels of dwelling construction.
In the regions, the market appears to be robust in major population centres. REIV data reports Bendigo prices went up by 7.9 per cent as a result of a major hospital project.
Greater Geelong saw prices rise by 6.7 per cent over the past year, while Shepparton values rose by six per cent and Benalla by 5.3 per cent. The tiny town of Ararat saw particularly strong results, rising by 20 per cent over the year, according to the REIV.
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