Melbourne’s cheapest suburbs to buy for first-home buyers to escape the rental crisis

Melbourne’s first-home buyers have been given a cheat sheet to escaping the rent trap or their parents’ place, with economists revealing the city’s cheapest suburbs to buy a house or unit.

4 Sharp Grove, Coburg North is on sale with Nelson Alexander Coburg for $650,000-$700,000.

Melbourne’s first-home buyers have been given a cheat sheet to escaping the rental trap or their parents’ place this spring.

The most affordable suburbs for houses and units from inner Melbourne to the outer fringes have been picked out by the economists at PropTrack, offering a chance to buy as close as 5km to the CBD for around $380,000.

Units just outside the city in Travancore and Flemington had median sale prices between July 2022-2023 of $340,000 and $378,000 respectively.

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Those with budgets under $900,000 and looking to purchase a house may still find their dream home in 10 suburbs highlighted by PropTrack less than 11km outside the city.

Braybrook, Heidelberg West, and Coburg North have median sale prices between $725,000-$880,000.

It comes as the number of first-home buyers entering the market in the first half of the year dropped to just 13,544, the state’s lowest level since 2017.

By contrast, the booming property market in the first half of 2021 attracted a record 26,851 sales to market entrants.

PropTrack economist Angus Moore said affordability was strong in 2021, but that had changed “very, very rapidly” as interest rates surged.

“Affordability is now sitting at its worst level in at least three decades and as a result, we’re not seeing a lot of first time buyers at the moment,” he said.

Mr Moore said if Victorians had the means to buy now and move out of the rental market, they should, but understood that was not a viable strategy for everyone.

“Saving a deposit is a real constraint,” he said.

“Given where mortgage rates are at the moment, it’s very plausibly more expensive to pay a mortgage than it is to rent even despite the increases in rents.”

The two-bedroom apartment at 2006/18 Mt Alexander Rd, Travancore is on sale with a $319,000 price guide.

The apartment sits on the 20th floor and is just steps from Royal Park and Melbourne Zoo.

Both bedrooms have built-in robes and access to a central bathroom.

Loan Market Australia mortgage broker Jacob Decru said many first-home buyers were starting to accept what their budgets were now compared to what they could borrow before the Reserve Bank hiked interest rates 13 times.

“But if their borrowing capacity has dropped by a couple of $100,000, where will they be looking? That’s the problem,” Mr Decru said.

“That debt-to-income ratio of what they can borrow is a bit of a wake up call; it’s about aligning budget to purchase price and then area.”

Despite the decline, Property Home Base founding director and buyers agent Julie DeBondt-Barker said she was seeing first-home buyers “pick themselves up and brush themselves off” and get back into the market.

“But times have changed on what they could have achieved six months or a year ago,” Ms DeBondt-Barker said.

“They are either having to reduce the size of the home or change the location.”

The two-bedroom home at 18 Coral St, Heidelberg West is on sale with Darren Jones Greensborough for $540,000-$580,000.

The lounge finished with timber floors.

Outside, there is an all-weather alfresco and lawn.

However after noticing an influx of landlords selling off more affordable homes she has been advising first timers to be wary as many were apartments of “very little quality”.

“The apartment market is flooded; there’s a lot of high rises, a lot of high owner’s corp fee buildings,” Ms DeBondt-Barker said.

“A lot of the new builds have lots of issues with the buildings, from combustible cladding to all the leaky balconies in Melbourne.

“We’re just trying to steer them away from those problems that we see every day.”

The two-bedroom home at 4 Sharp Grove, Coburg North is a California Bungalow.

The abode is walking distance to Merlynston Station and Hosken Reserve.

Barry Plant executive director Mike McCarthy advised first-home buyers to pursue the most expensive home they could afford, with a buffer in place.

It’s advice the executive said he wished he’d taken when he was younger.

“If you can buy something more expensive in a better suburb, you’ll probably end up better off in the long run,” Mr McCarthy said.

“I look at the first home I bought, and I bought far too comfortable.

“I should have bought a home probably twice the value and it probably would have set me up much better in terms of real estate, investment and value for the next 40 years after that.”

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