A struggling big city housing market is tipped to recover next year because of high overseas immigration.
Melbourne, ‘s second biggest city after Sydney, has been a poor performer in 2024 with house prices falling by 2.3 per cent in the year to November, as a result of the Victorian government’s $975 land tax on investors.
This occurred as house prices have soared by double-digit figures in Perth, Brisbane, Adelaide and parts of western Sydney.
That has made Melbourne a better value housing market with $600,000 still buying a home with a backyard relatively near the water and train line.
My Housing Market chief economist Dr Andrew Wilson predicted Melbourne was likely to receive even more overseas migrants than Sydney next year, which would boost its housing market.
‘I’m expecting that to move 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 for net overseas migration but it is trailing New South Wales at the moment.’
During the last financial year, 132,859 overseas migrants on a net basis moved to Victoria compared with 142,473 who went to NSW, n Bureau of Statistics population data showed.
‘s two most populated states housed 61.8 per cent of the influx of foreign arrivals, as skilled migrants and international students flooded into Sydney and Melbourne.
Sydney is becoming increasingly unaffordable and in the year to June, 30,865 NSW residents on a net basis moved interstate, as Queensland received 29,910 new people from other parts of .
But Victoria’s interstate migration population increased by 664, giving it a net population increase of 133,523 with overseas migration factored in.
By contrast, NSW had a smaller population increase of 111,608 with the state having both the biggest interstate exodus but the highest overseas migration intake.
‘Victoria, overall, was still the leading beneficiary of net migration,’ Dr Wilson said.
‘That’s a positive in terms of turning around what’s been a subdued Victorian or Melbourne housing market.’
Mr Yardney predicted Melbourne prices would rise in 2025 and 2026 to make up for a bad 2024.
‘The Melbourne housing market has not performed as strongly as other capitals over the last few years, but Melbourne’s property values are expected to play catch up over the next year or two,’ he said.
Victoria’s population growth pace of 2.4 per cent was also significantly higher than NSW’s 1.7 per cent level and it was even ahead of Queensland’s 2.3 per cent increase.
Only Western had a higher growth level of 2.8 per cent.
Melbourne’s median house price of $923,422 is still beyond the reach of an average-income earner on $100,017 buying alone.
But it still has affordable suburbs with CoreLogic data showing mid-point prices under $600,000 including Frankston North on $591,214, with prices flat over the year as values fell across most of Melbourne.
The suburb 54km from Melbourne’s city centre is considerably cheaper than equivalent other suburbs in Brisbane including Caboolture where $738,458 is now the mid-point.
In Sydney, houses in the city’s outer south-west are around the $1million mark with $600,000 only buying 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 mid-point house price of $901,661.
Property group Domain is forecasting 3 to 5 per cent price growth in Melbourne next year, which would still be weaker than Sydney’s 3.5 per cent increase this year.
It would still be well below Brisbane’s 12.1 per cent increase, Adelaide’s 14 per cent rise and Perth’s phenomenal 21 per cent surge.
Mr 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 several factors that are transitory in nature, but the long-term fundamentals of Melbourne remain strong, with a robust economy, strong population growth tipped to overtake that of Sydney and significant new infrastructure in the pipeline, making it one of the most liveable cities in the world,’ he said.
‘Despite the current struggles, there is a significant opportunity in Melbourne’s property market.’