Not since the 1980s has Melbourne (as well as Sydney) experienced such a major downturn in the housing market. Gradual gains made up until the pandemic years have now levelled off and the coming months and years are projected to show a significant decline in housing prices in Melbourne, which in turn is getting many to ask whether now is the right time to buy or if it’s better to wait.
This is a big question that involves many financial cogs and wheels that can differ from person to person, but the following information may help you get a better idea of the situation from 2022 onwards.
Inflation: the Elephant in the Room
Inflation is one of the key drivers in the economic downturn in Australia and it certainly is affecting the way we live our lives in matters ranging from housing to just about everything else. While the Reserve Bank continues to print money (“money machine go brrrr”) many are seeing their savings and housing equity vanishing at rapid rates.
The most recent statistics on the CPI from ABS in September 2022 show a sharp spike upwards to 7.7 per cent inflation (annual change to September 2022), all while the Reserve Bank claims to be fighting a “war” on inflation.
This has gravely affected the housing market across the nation, with housing prices falling an average of around $415 per day, or $51,000 from July-September alone in median housing price. In some parts of the country, prices have been falling at a staggering rate of around $1,000 per day.
Housing Market Forecasts for Melbourne in 2022-2023
With only a few months left of 2022, many are speculating on the housing market for the remainder of the year and in the coming year.
Here are what some of the big banks have speculated for Melbourne’s housing market from 2022-2023:
| Bank | 2022 | 2023 |
| ANZ | -11% | -6% |
| CBA | -3% | -9% |
| NAB | -7.7% | -14.1% |
| Westpac | -8% | -10% |
| Mean | -7.4% | -9.8% |
Construction Costs at All-Time Highs
Adding pain to injury, the costs for building homes has also soared in recent months. Steel has shot up by 54.2% and timber has skyrocketed by 37.8%, making it far costlier to build homes overall. This has an effect on limiting the supply of housing, or at least heightening the barrier to entry for first-time homebuyers as the total costs will inevitably be passed onto them.
Is it Worth Investing in Real Estate in 2022-2023?
Nevertheless, demand remains high, thereby pushing up the equilibrium prices. Australia has not often made the top 10 lists of affordable places to buy real estate worldwide, and current and projected economic conditions look like they’ll be continuously pushed just beyond the reach of many first time homebuyers.
While the housing downturn presents a number of key problems for current homeowners (and for many first-time homebuyers), tumbling home prices also present opportunities for those with the liquid capital to make that critical down payment on a home. Real estate has also historically (even in previous economic crises) proven to be a fairly stable hedge against inflation. Combine this with the high demand for rentals and the possibility to earn a somewhat passive income, and these opportunities can in fact be a lucrative alternative to stocks, bonds, or cryptocurrency.
One of the best ways to maximise potential rental income and/or to have your own place to call home is to invest in a dual occupancy home. For those interested in the possibilities and benefits of dual occupancy home ownership, it’s critical that you choose a reputable dual occupancy developer such as Trevor Homes.
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