Melbourne suburbs where property prices are cheaper than five years ago

Apartment prices in a string of inner-city and northern suburbs have lost ground over the last five years, revealing the effects of a decline in investor activity and post-pandemic tree-changes on Melbourne’s property market.

The steepest fall was in Carlton, where unit prices recorded a five-year decline of 33.3 per cent to a median of $320,000 by March, Domain data shows.

Melbourne CBD unit prices weakened by 12.9 per cent while unit prices in Docklands have dropped by 6.6 per cent since 2019.

Domain head of research Dr Nicola Powell said a lot has happened in Melbourne’s housing market over the last five years to affect unit prices, from a disrupted rental market to a wave of tree-changes since COVID hit.

“A lot of these suburbs (that experienced price falls) are tenant led. Demand is driven by investment activity ... they’re not owner occupier-led suburbs,” Powell said.

“Most of these locations have got either high levels of density – Carlton is probably a good example – or they are areas that are strongly led by investment activity, and we know investors have been shying away from the Melbourne market. ”

Powell said lifestyle suburbs in Bayside and the outer-east were experiencing the highest property price growth compared to smaller dwellings in high density areas.

“Units are clearly the weaker point of Melbourne – there are more suburbs that have seen a deeper pullback in price over five years,” Powell said.

House prices softened in a handful of suburbs including Brunswick West (-9 per cent), Braybrook (-5.7 per cent) and Oak Park (-5.1 per cent).

Carlton house prices weakened slightly by 1.2 per cent to a median of $1,292,500.

Buyers agent Cate Bakos said weaker or even stagnant prices could help first homeowners break into the housing market.

“For first home buyers, obviously, there is the pressure on saving that forever increasing deposit. Time has stood still for them in these locations, and I’d argue that they’re great locations for first time buyers who want to be integrated with the city,” Bakos said.

Bakos said while the price of older boutique style apartments hasn’t really moved in the last five years, it was likely student-style accommodation and high-rise apartments that were bringing down prices in many inner-city suburbs.

“Some of these areas have a lot of high-rise (apartments) and so that catches people out who bought off the plan and paid a premium, and then the property declines in value – you see that happen a lot in any market with high-rises,” Bakos said.

A handful of suburbs saw house prices weaken. Credit: Wayne Taylor

PEXA chief economist Julie Toth agreed that many of the suburbs which had price declines were traditional investor markets, with owner occupiers only making up a small percentage of properties in areas like Melbourne and Carlton.

Toth added that tree-changers during the pandemic had played a role in bringing down prices in high-density areas.

“Many of these inner urban locations, particularly the north, that’s where we saw those really big changes and responses during COVID and immediately after, so we did see property prices fall in the inner city,” Toth said.

“Particularly for inner-city apartments, places like Carlton, Melbourne, North Melbourne, Brunswick, they were the areas that were hit hardest with price falls. Victoria had a big exodus of people moving from inner Melbourne to regional areas, the international students left, and we did have a big surge in interstate emigration as well, which is actually still playing out.”

Toth said while Melbourne’s overall property market has remained strong, this data highlighted there has only been a partial recovery since COVID.

“Even when property prices are rising, there are often pockets where that’s not the case,” she said.

The property director at Entourage Property, Antoinette Sagaria, said house prices in some suburbs were brought down by older properties in need desperate need of renovation.

“We’re seeing a lot of stock that would be at a point in its life cycle where it would require capital investment and that’s causing that change over,” Sagaria said.

“So you have a lot of long-term investors that are now selling off due to pressure from land tax, from the cost of maintaining those properties.”

Sagaria agreed that high-density developments were common in suburbs where unit-prices had softened, saying these properties are highly volatile because they are plentiful and attract a transient, often student, population.