Metro Melbourne v2

Metro Melbourne Outlook

Interesting for: Buyer, Seller, Investor, Renter, Lifestyle, Rental Provider

Over the last couple of years, Melbourne property buyers and sellers have, as a collective, undoubtedly felt like the annoying kid in the back of the car asking mum and dad driving in the seat in front - “Are we there yet?” The parents in this metaphor are obviously the real estate agents, the banks, and the RBA.

And that is the big question we’re all still pondering – is the Melbourne property market there yet? Or slowly getting there anyway? With each passing day in 2024, all indicators are pointing to a significance resurgence in the metropolitan market, with the next few months looking like we could realistically reach the destination.

Strong March number indicates a bumper rest of autumn and winter ahead
If the statistics are anything to go by, Melbourne is in store for a bumper rest of autumn and winter selling season.

Throughout March, the Real Estate Institute of Victoria (REIV) reported 4,085 properties auctioned, with 2,476 properties sold and only 766 passed in. 587 properties were sold prior to auction, with the clearance rate looking very strong at 78.2% throughout the month. These numbers are even more impressive with March featuring the Moomba long weekend which always disrupts weekend auction and sales, and the Easter long weekend which was earlier than previous years.

In terms of home value, Melbourne sits at a median home price of $778,882 as of March 31, which is up 3.2% over the last 12 months. While the median home price was slightly down over the first quarter, it did rise 0.27% according to PropTrack in the month of March alone. With high demand for properties and a market looking more stable by the day, confidence remains high for the next few months.

One streak ends and another one begins
The streak of RBA rate rises has ended with the hopes of a new streak potentially on the horizon. It has been since November 2023 when the RBA dragged the official cash rate up to 4.35%, but since that time there have been no rate rises as of April 2024. Even before the November hike last year, the last rise had been in June 2023. That translates to only two rates rises in the last ten months.

Mortgage payers will now hope for the start of a new streak of the cash rate remaining untouched for the foreseeable future, before the RBA is predicted to cut rates towards the end of this year and into 2025. “We have 75 basis points of rate cuts in our profile in late 2024 and a further 75 basis point of easing in the first quarter of 2025, which would take the cash rate to 2.85 per cent,” said Gareth Aird, Commonwealth Bank of Australia’s Head of Australian Economics to the ABC recently.

With talks of the RBA holding off on cutting rates before the US Federal Reserve does (which was expected in July 2024 but has now been predicted for September 2024), Angus Coote who is the co-founder of Jamieson Coote Bonds believes the RBA could cut rates as early as August. “The US economy is not slowing as much as the rest of the world, but they do not have the benefit of the transmission mechanism of a mainly floating rate mortgage market that we have in Australia,” Mr Coote told the Australian Financial Review “Given the US exceptionalism, the RBA can definitely cut before the Fed.”

Is a change in stamp duty tax on the cards?
Speaking at the launch of the Urban Development Institute of Australia (UDIA) back towards the end of March, Victorian Treasurer Tim Pallas hinted at a major reform when it comes to stamp duty tax. Victoria is currently one of the most expensive states for stamp duty, with buyers paying anywhere from 1.4% to 6.5% on the value of a property upon purchase.

While completely scrapping the tax is not on the cards (which he has said, if it were scrapped, would have a $30bn hit to the budget), the treasurer noted that he and the Victorian Government were very open to reform on stamp duty. “I do recognise that by removing stamp duty and stopping that one-off transaction, you liberate a lot of people to be able to move around the economy to better suit their material circumstances,” said Mr Pallas.

While the Victorian Government will consider many options, many experts say that replacing the stamp duty tax with a reformed land tax is a smart option. The Victorian Government led by Jacinta Allan have already brought in a bill (effective July 2024), which abolishes stamp duty for commercial and industrial properties, and have replaced it with a broad-based land tax. This might very well be a reform (or version of) that could be used for residential properties in the near future. We’ll have to wait and see.

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