Future Victoria: Melbourne house prices could hit $2m by 2030

A typical house price could be a whopping $2m in less than eight years, with properties in even entry-level suburbs topping $1m.

Melbourne’s typical house price could be a home-dream crushing $2m by 2030, with even an entry level house in Melton topping $1m before the end of the decade.

The more than million-dollar rise has even the forecaster who made it questioning how Victorians will be able to pay the seven-figure mortgages that would accompany such prices.

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PRD chief economist Dr Diaswati Mardiasmo has warned with simply not enough houses for the expected demand, Melbourne might begin to see family home loans where siblings or cousins team up to buy a home their families share.

The practice is already relatively common in Asia’s most expensive cities, such as Singapore and Hong Kong.

But PropTrack’s top economist Cameron Kusher found prices would be sitting at a more conservative $1.6m if they were to rise as they have over the past eight years. That still marks an about $650,000 increase from today’s $945,200 median house value in the city.

MELBOURNE MEDIAN HOUSE PRICE FORECASTS FOR 2030

Greater Melbourne: $2.048m

Greater Melbourne (units): $1.143m

Brighton: $7.051m

Broadmeadows: $1.453m

Dandenong: $1.794m

Melton: $1.258m

Reservoir: $2.313m

Toorak: $7.926m

Wantirna: $2.881m

Werribee: $1.563m

*Source: PRD chief economist Dr Diaswati Mardiasmo

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Mr Kusher said the almost 70 per cent growth in house values across the past eight years was unlikely to be matched as interest rates — which are rising at the fastest rate since the 1990s — were not in a position to fall the way they had, since 2011 to help drive the market.

He added that house prices were also far enough above units that buyers would increasingly look at the more affordable alternative.

New developments are constantly going up throughout the suburbs of Melbourne and many other capital cities around Australia to meet demand.

“Overall, we expect growth to be slower over the next eight years, particularly so for houses,” Mr Kusher said.

“Units may potentially rise in value by more than they did over the past eight years due to their relative affordability, desirable inner locations (in most instances) and their attractiveness to investors, with the rental market tightness expected to persist over the coming years.”

Despite many economists predicting substantial home value falls in the months ahead, Dr Mardiasmo, who is a lecturer at the Queensland University of Technology, said Melbourne simply didn’t have enough supply to meet demand and was likely to return to growth sooner rather than later – despite rising mortgage costs.

“I’m confident we will see similar growth to last decade,” she said.

Melbourne doesn’t have enough houses to meet demand, according to PRD’s Dr Mardiasmo.

“And that’s because of the supply lag and a lot of new migrants coming to Melbourne.

“And I don’t see that supply issue being addressed or fully fixed between now and 2030.”

Dr Mardiasmo has also added in a bit of a boost to home values from 2027, the year after regional Victoria hosts the Commonwealth Games.

The result could see the city’s most affordable suburb, Melton, join the $1m club in 2029, and the median in our most expensive postcode, Toorak, soar from $4.7m to an incredible $10.949m.

Dr Mardiasmo noted it was possible renewed Covid lockdowns, a deeper than expected economic hit to Australia’s prosperity, and an escalation of Russia’s war in Ukraine could all impact her forecast.

Some estimates have Melbourne’s typical house price soaring to $2m by 2030.

But the biggest question was whether buyers’ would be able to borrow the sums needed to keep the market moving.

“The average loan in Victoria today is about $500,000, for people to be able to afford these increases, they will have to be able to service double that,” she said.

“If we are thinking about how much debt needs to be serviced, I think it will put too much stress onto households.”

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