The tightness in Victoria’s housing market is increasing as experts warn of migration pressure. Planning delays and entry-level shifts are fueling a growing affordability crisis.
Melbourne’s affordable housing market is at risk of extinction as record levels of migration add a $35,000 penalty to the cost of starter homes.
Research firm FoundIt has warned that pressure from first home buyers competing with newcomers is now hitting Melbourne’s north and west hardest, including Broadmeadows, Campbellfield, Coolaroo, Meadow Heights, Melton and St Albans.
FoundIt’s analysis shows that the broader migration trend in Australia based on the demand measure is around 800,000 to 900,000 people per year, while the number of completed homes hovers closer to 525,000 to 535,000.
RELATED: Kmart joined the new Melb shopping center in the south east
Fists fly in the air at the Chapel St auction as a wild brawl breaks out
Inside Melbourne’s wild new LEGO restaurant
Australian Bureau of Statistics data shows more than 500,000 people arrived in one year after borders reopened, while new home construction remains well below the 2018 peak of more than 220,000 homes.
FoundIt says supply and demand are shrinking fastest at the lower end of Melbourne house prices, at and below $750,000.
FoundIt research head Kent Lardner said the housing debate has become dangerously one-sided.
“My concern is that those in power have ignored the demand,” Lardner said.
New data reveals the widening housing market bottleneck as population growth outpaces supply across Victoria. Photo: Gemini.
FoundIt research head Kent Lardner warns that planning is stalling and construction costs are worsening the state’s housing shortage.
“Since Covid, there has only been one issue discussed in relation to house prices, and that is supply.
“In reality, anyone who took economics in high school knows that it’s all about supply and demand.”
The researcher said the mismatch between migration and construction was narrowing fastest at the bottom of the market, as that is where new demand competes most directly with first-home buyers.
“The first impact is on rental prices,” he said.
“Most people who arrive in any country don’t immediately buy property.
“We have seen rents fall above 30 percent of household income, which is seriously unaffordable.”
Mortgage Choice Greenvale agent Rebecca Stella says the pressure on affordability is forcing buyers to rethink what ‘entry level’ means now.
Mortgage Choice Greenvale agent Rebecca Stella said the price review was immediate and brutal for local buyers trying to save while renting.
“The impact is brutal in dollar terms. If prices rise 5 per cent on a $700,000 property, that’s $35,000,” Ms Stella said.
“Most people can’t save $35,000 in a year while paying rent and dealing with the rising cost of living.”
She said these are working-class and middle-income markets, where even small percentage increases permanently change the meaning of ‘entry level’ and remove the first rung from the property ladder.
New estates on the outskirts of Melbourne remain in high demand as buyers hunt for relative affordability. Photo: Jake Nowakowski
PropTrack’s January market trends show how quickly some of those suburbs have moved.
Coolaroo is up 19 per cent in the past year to around $627,000, while Broadmeadows is worth almost $659,000.
MeltonLong seen as Melbourne’s last affordable housing market, it now stands at around $548,000, following double-digit growth.
Ms Stella said many buyers in the $600,000 to $750,000 range were already borrowing near their ceiling, meaning another year of growth could completely wipe out deposit progress.
“For many first-home buyers, it’s the difference between entering the market and missing out,” she says.
The entry-level market has moved significantly higher, with buyers increasing their budgets as supply tightens. Photo: Gemini.
“This isn’t about blaming migrants, it’s about the numbers.
“If migration starts, but the housing supply and infrastructure do not keep pace, you create a bottleneck.”
Mr Lardner added that rising rents also slowed deposit formation and pushed buyers further out geographically.
“The second big impact is that the sub-$750,000 market is virtually extinct,” he said.
“That exacerbates the wealth gap… we need a viable first rung of the ladder.”
FoundIt’s modeling suggests that a return to pre-Covid population growth would ease pressure on house prices by 2 to 3 percent per year.
Madeleine Roberts, director of MR Advocacy, says competition at the bottom is fierce as investors and first home buyers clash.
Madeleine Roberts, director of MR Advocacy, said Melbourne’s “flat” result masked the intense competition in precisely those price ranges.
“If you take the average across the city it may look flat, but that doesn’t reflect what’s actually happening on the ground,” Ms Roberts said.
She said buyers who once expected a detached home under $700,000 in Melbourne’s northwest were now shifting their expectations to townhouses, smaller blocks or moving further afield.
“As more people chase the same number of homes, it’s always the entry level that comes under pressure first,” she said.
“You can’t keep telling people forever to ‘look further’.
“At some point the bottom rung disappears.”
Sign up for the Herald Sun weekly property update. Click here to receive the latest news from the Victorian property market straight to your inbox.
MORE: $500 meters of Portelli’s ghost tower neighbor ‘in limbo’
Vic Real Estate ‘panic’ as REIV leaves
Classic car deal offered with a $1.4 million Melb pad
david.bonaddio@news.com.au
#Migration #wave #puts #pressure #Melbournes #cheapest #homes #FoundIt #real #estate.com.au