Melbourne is now the fastest growing city in Australia. This is based on current growth trends in population and house prices.
House prices in Melbourne continue to rise and in 20 years, the average house price is predicted to exceed $6 million. The strong demand for homes is what drives prices to soar. Reports have noted that this high demand not only comes from first home buyers but also from local investors, downsizers, overseas buyers and self-managed super funds and trusts.
Values of residential properties in Melbourne have soared continuously for years now such that the number of suburbs with a median house price of $1 million homes have also risen. From only five in 2006, there are now almost 100 in the million-dollar club. The first five to be included in the list were Toorak, East Melbourne, Canterbury, St Kilda West and Brighton.
Today, many of Melbourne’s eastern suburbs have joined the club in the past two years. In 2016, the average property prices were pegged at $1.2 million and five more suurbs in the inner north-west were added to the list. These are Strathmore, Essendon, Essendon West, Moonee Ponds and Aberfeldie. A major factor that pushed these areas over the million threshold was the surge in buyer activity not only among the locals but also among the so-called “Asian plutocratic class.”
When compared to average earnings, a house in Melbourne 20 years ago was an affordable 3.4 times the annual earnings. Today, it is more than 11 times the annual earnings.
The National Australia Bank (NAB) predicts that house prices in Melbourne will continue to rise this 2017 although at a slower pace. It is predicting a 5.6 percent increase based on sentiment towards property and an assumption of a much lower interest rates this year. In the past two years (2015-2016), Melbourne has recorded a double-digit price growth according to CoreLogic’s index.
These soaring house prices have made it more difficult for young people to own their dream home. Most often, they need more purchasing power compared to what their parents had in the past. Reports even noted that even if both spouses earn an income, they would still find it hard to buy a house.
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