Is the Melbourne property market set for a rebound? That's the question investors are asking after a year in which the southern city was clearly Australia's worst-performing mainland capital market, with median total dwelling values falling by -1.0 per cent in the 12 months to August 31.
Over the same period all other mainland capital city markets rose, some dramatically, pushing Melbourne further down the property pecking order - making it relatively more affordable, potentially opening buying opportunities in well-located suburbs.
Data provider CoreLogic says the median dwelling value in Melbourne of $776,000 is now less than Sydney, Brisbane, Canberra, Perth and, for the first time since it started recording prices, Adelaide.
Eliza Owen, Head of Research at CoreLogic, says there are many factors contributing to Melbourne's malaise, including a surfeit of supply and the increased tax burden on investment property owners in Victoria.
Buyer's agent Brenton Potter, Manager at Wakelin Property Advisory, acknowledges Victoria's onerous property tax regime has impacted investor markets, but says well-priced city terraces are still in demand.
"We're still seeing some reasonable competition across the board for those types of properties but not at the (price) levels they reached in 2021," Potter says.
Infrastructure shows light at the end of the tunnel in Melbourne's inner west
He believes houses in Melbourne's inner-western suburbs Footscray, Seddon, Yarraville and Newport are prime investment prospects due to lower prices combined with imminent transport and health infrastructure.
Projects include the Metro City Tunnel, scheduled to open in 2025, providing much better CBD and cross-city connections for the area, and the new $1.5 billion Footscray Hospital, also due to open next year.
"If I go back to the 2021 market in Melbourne's inner-west, in areas like Seddon, Yarraville and Footscray, two to three-bedroom properties were selling back then for over $1 million," says Potter.
"Right now, if we're looking at those properties there's probably opportunities under $1 million."
Potter says the target properties are single-fronted weatherboard properties. "Using Footscray as an example, if they're in the right spot you're walking distance to Footscray Station," he says.
"With the new Metro Tunnel line coming in there, that will get you into the Parkville hospital precinct in just a few stops (and) I think that's going to open up the area for young medicos."
John McGrath, Managing Director of McGrath Estate Agents, says he expects the Melbourne market to bounce back.
Gap widens between Sydney and Melbourne
"The gap between Sydney and Melbourne has widened, particularly at the upper end, and I think at some point there will be a recalibration," says McGrath.
He likes well-established suburbs with good access to the city and a lifestyle twist.
"St Kilda and Brighton, those areas, even though they're not cheap, I think when the Melbourne market gets its momentum back, wealthy people are going to be looking to buy a beachside home within 20 minutes of Melbourne's CBD."
He also likes the local government areas of Stonnington and Boroondara including Hawthorn, Kew, Malvern, Surrey Hills, Balwyn, South Yarra and Toorak.
