‘Patchy growth’: Melbourne suburbs where house prices are still rising

Bowie Labergerie and partner Lexie spent six months looking for their first home together, before buying in March. In that time, they watched prices climb and competition ramp up.

“I’m not going to lie – it was a pretty rough process,” said Labergerie, a 34-year-old plumber.

The pair eventually bought a double-storey townhouse in Seaford, close to the edge of their Frankston to Chelsea search area. They were able to afford more, thanks to the Australian government 5 per cent deposit scheme, but it also meant competing with a surge of new buyers.

“The way I was looking at it, the quicker we get into this house, the quicker we stop paying rent … so we can start actually paying our mortgage,” Labergerie said.

Melbourne’s median house price fell by 0.6 per cent in the March quarter, the latest Domain House Price Report, released on Thursday, reveals.

But declines at the top end of the market thanks to global uncertainty and interest rate rises obscured stiff competition for affordable first-home buyer units and family homes in the middle ring, Domain chief of research and economics Dr Nicola Powell said.

“We’re not entering a period of free-fall in terms of pricing,” she said.

“I think that what we’re going to have is patchy growth, but there is going to be a floor on [prices].”

Notting Hill, Lalor and Thomastown’s unit prices surged with annual gains in the teens, even as their medians remained under $600,000, well within reach of first home buyers.

For houses, there have been significant gains in family-home suburbs such as Heidelberg, Fairfield and the more affordable Frankston North over the past 12 months.

Seaford’s median house price increased by 6 per cent in the year to the end of March, to $880,000.

While there weren’t enough sales for a median unit price, Labergerie’s broker, Lucy Meer of Loan Market Razor, said the Bayside areas she serviced were increasingly competitive for units.

She saw more first home buyers competing for homes, but they were “being absolutely flogged by downsizers,” she said.

Hampton topped the list for annual change in unit prices in the March quarter, growing by almost a quarter in the past year.

With a median unit price of $1,121,000, it’s an outlier – most of the suburbs with the strongest annual unit growth were under $600,000.

Powell said the seaside suburb was a “lifestyle market” that appealed to both wealthier first home buyers wanting to be close to prestigious schools and the city, and downsizers looking to stay in their community.

Buxton Sandringham agent Marc Stafford said Hampton’s villa units appealed because they often had a small yard, larger rooms than an apartment and generally lower body corporate fees.

“And they’re not making any more of them,” he said.

Notting Hill, further south-east, had the second-highest growth in unit prices, at 18.8 per cent over the past year, to just $410,000.

Century 21 agent James Tan thought people were starting to realise the suburb, near Monash University, had many of the same amenities as neighbouring Glen Waverley at a lower price.

“If you move just across Ferntree Gully Road, the price jumps a lot,” he said.

Bunyip, 67 kilometres from the CBD and on the boundary of the Greater Melbourne area, topped the list for annual house price growth, at 23.4 per cent.

The Gippsland town had a median of $880,000, dwarfed by the next four most profitable suburbs – Heidelberg, Fairfield, South Melbourne and Bonbeach.

Powell said Bunyip’s far-flung location showed Melbourne’s sprawl could be a strength when it came to affordability.

She pointed to Melton, in the west, as another “first home buyer heartland” where a typical house cost about $544,000.

“It’s prime affordability,” she said, noting that – with its 14.1 per cent annual growth – it was more likely to weather the uncertainty and interest rate rises affecting the broader market.

Prestige suburbs Toorak, Malvern, Kew and Balwyn all had double-digit declines in their median house price over the year.

PRD chief economist Dr Diaswati Mardiasmo said these areas were already expensive, with many more than double the price of the suburbs that rose in price over the past year.

“It’s normally the higher blue-chip suburbs that get hit first,” she said.

“They have a much higher price … so obviously you’re going to be committing to a much higher level of debt.”

She thought buyers in general were more cautious, but those looking at more affordable houses – particularly below the $950,000 cap for the 5 per cent deposit scheme – were still competing in a “tight market”.

“That’s why we’re still seeing some growth in certain suburbs,” she said. “There are buyers who are ready to go and have been waiting to be able to get into the market.”