Melbourne on the march as strong migration boosts Victoria’s population

Strong migration to Victoria is helping to drive property prices higher but the bubble looks likely to pop next year.

David Shen, Australian Director, Wuzhong International. Picture: Stuart McEvoy.

Strong migration to Victoria is helping to drive property prices higher but industry experts are warning the bubble looks likely to pop next year.

Figures from the Australian Bureau of Statistics have shown Victoria’s population had the most rapid rise over the year to March, growing by an estimated 133,500 people.

But this is reducing, with net interstate migration falling about 12,800 people or 15 per cent annually.

Housing Industry Association chief economist Tim Reardon said it was natural for population levels to pull back from “unsustainable levels” as overseas migration fell.

“The Victorian population growth rate has been unsustainable. We think that will come back to the long-term average over the next couple of years,” Mr Reardon said. “You’d think all the apartments coming on would help retail expenditure as people look to fill up with appliances, but this hasn’t happened.”

Heightened migration levels have been buoyed by job creation within state government infrastructure projects as private sector building commencements and approvals slowed.

“As building activity cooled, there was a pick-up in infrastructure. This created jobs and housing demand that has helped with growth,” Mr Reardon said.

Melbourne looked to be leading the market out of the market slump after the market moderated in July. While confidence and strong auction clearance rates helped Sydney take off, the country’s second-largest capital maintains an edge, growing 6.4 per cent in the November quarter compared to Sydney’s 6.2 per cent growth.

Affordability is acting as a driver for Victoria. Median dwelling values in Sydney eclipsed Melbourne by almost $200,000 though to November, sitting at $840,072 versus $666,883.

Andrew Wilson, chief economist at My Housing Market, said it was a “discount market” from a buyer’s perspective compared to the 2017 peaks.

Off-the-plan sales are still sluggish in Sydney and Melbourne, with buyers looking to secure premium grade stock at a time that more units flow into the market. Data from realestate.com.au shows Wuzhong International’s premium offering, Bowen and Queens — priced between $2.4m and $4m — is the top-viewed project on the site.

Wuzhong director David Shen noted a spike in enquiry over the past six months, particularly from those looking to migrate from interstate.

The Chinese developer has sold about a third of the units within the $160m South Melbourne tower to interstate buyers, particularly from Sydney.

“Melbourne is still one of the most influential cities in the world. It has a very good lifestyle and offers much better public transport and infrastructure,” Mr Shen said.

“Also, the cost of living is more affordable than the other major capital cities, making it more attractive.”

Mr Shen said the company was offering incentives.