Home values in Melbourne’s bayside suburbs are falling despite a broader property market upswing, as experts warn that vendors are pricing their homes higher than the market is willing to pay.
While Melbourne’s property market has been gradually rising following three interest rate cuts, Cotality figures show that house values in the Bayside area have fallen by 3.4 per cent in the past month, and by 2.1 per cent over the past three.
Cotality head of research Eliza Owen said the figures were not what she would expect at the start of a new growth cycle. “Usually, when interest rates are falling and financial conditions are improving, high-end markets would be very responsive to that,” she said.
The RBA reduced its interest rate to 3.6 per cent last month, the third cut this year from its recent high of 4.35 per cent. More cuts are expected.
Owen said affordability issues were a factor, noting that Bayside’s median house value of almost $2,165,000 was nearly double that of Keilor ($1,147,000), where Melbourne home values are growing fastest.
“Affordability has vastly improved at the middle of the market, where it rose 1.4 per cent over the same period, but there is still a big disconnect between what households can afford and where the Bayside market is sitting,” she said.
Other areas where values have not risen in response to lower rates include Port Phillip, just to the north and also on the water, where the median house value is 0.7 per cent lower than three months ago, and at the other end of the bay, the Mornington Peninsula, down 0.5 per cent over the same time frame.
Buyer’s agent Nicole Jacobs, managing director at Cohen Handler in Victoria, said it was less affordability caps and more that vendors were “getting ahead of the market, when they need to be meeting the market”.