In February I interviewed three local estate agents. We all thought that the Melbourne property market would be flat to slightly up for the remainder of the year. However, the Middle East War makes this outcome unlikely. The Melbourne property market is falling. While some believe conditions will return to normal once the conflict ends, I don’t think it will…

Recession talk in Australia has increased in recent weeks.

An unexpected second-interest rate rise (with traders expecting another two this year), rising fuel prices and a cost-of-living squeeze have added to economic concerns.

Consumer confidence has fallen sharply with the ANZ-Roy Morgan Consumer Confidence survey dropping from 90 earlier in the year to a record low of 62.3 in early April.  This sort of confidence will weigh on house prices, particularly in Melbourne and Sydney.

Nationally it remains a two-speed housing market.

Over the past year house prices rose by 4.8% in Sydney and by 3.4% in Melbourne, though both markets appear to have peaked.  Melbourne prices are down by 0.9% since November including a 0.2% fall for March.

By contrast, Perth house prices increased by 2.5% in March and a massive 24% annually. Brisbane and Darwin prices rose by 19% annually and Adelaide by 11.4%. All had positive gains in March.

What is likely to drive property price falls in Melbourne?

Higher stock levels are a key factor. More than 3,200 properties are currently for sale in Melbourne, and agents talk of more stock coming on to the market.

While population growth has been strong – there were 105,000 new residents in Melbourne last year – 90% have come from overseas. Most new arrivals rent initially, supporting the rental market rather than immediate buyer demand. At the same time, Melbourne and Sydney continue to lose residents to interstate migration, benefiting Brisbane and Perth.

With higher borrowing costs and living expenses, it is becoming a buyer’s market especially in Melbourne and Sydney. Auction clearances rates in Melbourne are now around 60% when they were over 70% last year.

The Property Cycle Turns.

The 18.6 year property cycle predicted a property price decline in 2026/27 and Melbourne and Sydney appear to be entering the early stages now.  While a sudden fall in prices is unlikely, expect to see Melbourne prices and Sydney soften over the next 6 months, even after the Middle East war is settled.

The Takeaway.

I think we are facing slower economic conditions caused primarily by what is happening in the Middle East. Expect to see higher cost of living, high petrol prices, rising inflation and rising unemployment. Melbourne may well be the first to feel the impact.

If you’re considering selling, acting sooner may be worth exploring. In a buyer’s market, presentation matters more than ever.  After all, you are competing with every other seller in the market.

We offer property appraisals and guidance on how best to prepare your home for sale, so before spending money on improvements, talk with Phil or me. We’re here to help you plan the sale of your property with confidence.

Call me on 0418 517 643 or Phil on 0402 890 830 if you would like to discuss a property.