As the second largest property market in the country after Sydney, investors and homeowners are both watching with keen interest what is happening to Melbourne property prices in 2020. 

After negative results for all of 2018 and the first half of 2019, the market woke up after the Federal election, with buyers back on the hunt and agents busy again.

Let’s start by looking at how the Melbourne market performed in 2019, followed by what analysts and local agents predict for the year ahead.

What did the property market in Melbourne look like in 2019?

Like elsewhere, Melbourne property prices were in the red for much of 2019, but things did turnaround in Q3. Dwelling values were up +2.4% in October, the largest month-on-month growth since 2009. This was due to a number of factors, specifically:

• The surprise election victory for the Coalition, after being written off by pundits and polls alike
• The RBA’s cuts to interest rates, designed to revive the sluggish local economy
• The Australian Prudential Regulation Authority (APRA) relaxing off lending requirements, giving buyers slightly easier access to credit

As per OpenAgent, Real estate agent Leigh Hall of Hall and Partners/First National in Dandenong, thinks consumer sentiment revolved around the election result, “Before the election it was very bleak. People were concerned about all the negative gearing talk which impacted investors. After that, there was a lot more positive media and house prices started to rise again”. 

Despite this revival in the latter half of 2019, SQM Research’s Boom and Bust Report reported that dwelling values in Melbourne were still down -1.0% overall for the year to October 2019. 

Melbourne property market forecast 2020

NAB expects Melbourne house prices to be positive by the end of the year, to the tune of +0.7%, with units projected to be up +4.2%. 

Domain predicts that house and unit prices will increase by +1% by the end of the year, to end at median prices of $800,000 and $470,000 respectively. This is still +50% higher than they were just seven years ago, in 2012.

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How are Melbourne house prices expected to change in 2020?

NAB predicts moderate growth for capital cities, forecasting they will advance +4.5% in 2020, while they believe house prices in Melbourne will grow +7.4%. Domain forecasts house prices to grow by +1% to +3% next year, with units a little softer at 0% to +2%. 

SQM Research plots a number of scenarios, with varying market conditions. Given this, they forecast Melbourne property prices to grow +11% to +15% next year – based on a cash rate of 0.75%, a stable economy with no changes to current lending rules. Their worst case scenario has the Melbourne market growing 0% to +4% in 2020, based on a scenario where trade talks collapse, the economy weakens and interest rates are dropped to zero. In terms of median prices, QBE’s outlook is for Melbourne’s median house price to rise +5.1% to $810,000 in the three years to June 2022, while they forecast units to grow +3.8% over the same timeframe to a median of $570,000.  

Best suburbs to invest in Melbourne

According to OpenAgent, If you are looking to invest in Melbourne in 2020 you will want to focus your research on suburbs that have strong growth potential. With this in mind, here are 5 locations which could tick all the boxes in terms of location and growth prospects.

• Melton, where the median house price is an affordable $385,000 with a gross yield of +4.3% and a median unit price of $315,000 with a yield of 4.8%
• Dallas, where the median house price is $455,000 and the gross yield is +4.0%
• Officer, where the median house price is $547,000 and the gross yield is +3.8%
• Thomastown, where the median house price is $587,000 with a gross yield of +3.4% and a median unit price of $437,000 with a yield of 4.2%
• Croydon North, where the median house price is $787,000 with a gross yield of +3.4% and a media unit price of $588,000 and a yield of +3.6%

Finance Circle Group is a Finance and Mortgage Broker and not a property agent or financial adviser. This article is general and has not taken into account your objectives, financial situation, or needs. Consider whether any advice is right for you. You may need financial advice from a qualified adviser. Consider the product disclosure statement (PDS) before making any financial decision. For more information. Information is sourced from OpenAgent, CoreLogic, Domain and other web sites that are experts in property market.