I was listening to a podcast the other day where they compared the property markets in Melbourne, Sydney and Brisbane. They noted that compared to Sydney and Brisbane, Melbourne’s house prices have remained stagnant over the past few years. This was due to a range of factors such as the 2020-21 COVID-19 lockdowns in Melbourne, the apartment oversupply across the city and high land taxes for investors. The stagnant house prices have made the Melbourne property market conducive to first home buyers and investors looking to buy their first home or enter the property market.
I have been tracking the outcomes of auctions in the suburbs of interest over the past few weeks. And just yesterday, I was looking over properties in the suburbs of interest that have been sold over the past month. Although I can see bargains in some properties that are within my borrowing capacity, I will be going into a property market that may be increasingly difficult to get into, for two reasons.
First, I am looking for a property that I can live in for a long time and that will be in high demand in the future when I lease or sell it. That means the property has to be rare in the market, yet valuable to the future renter or home buyer. Apartments in high-rise apartments are not rare and are clearly targeted to investors looking to rent them out, so I am ruling them out. I am also avoiding apartments on or near main roads or train lines as they would make too much noise and are overpriced for their location. I am anticipating that these apartments would be hard to lease or sell to other people in the future, making them bad property investments.
Instead, I am looking for apartments in a quiet street that I can stay in for many years and that would be valuable to a future buyer. The apartment would have enough indoor space for me to live by myself and work from home. Additionally, there is a private balcony or backyard for me to get some fresh air or to have a barbecue. Ideally, the rooms would be nicely laid out, with the living rooms separate from the bathroom and bedrooms, so that I can separate areas to relax from areas to work and to sleep. These requirements eliminate a lot of apartments for me, leaving me with few options to choose from. Additionally, there is a lot of demand for these apartments with some of them going for auction. These will be competitive to buy, particularly as more people enter the property market to buy their first home or to invest. This will be a main challenge in buying my first home.
Second, having kept track of auction outcomes in the suburbs of interest, the property market is increasingly heating up. I am seeing that most properties were sold either before or on auction day. Where the sold prices have been made publicly available, most properties were sold above the upper limit of the price guide. That has made me feel a bit apprehensive on how competitive the auctions will be, particularly if it is the property I really want to live in.
Still, I have a few weeks before I get my pre-approval to buy my first home. And there are more properties that will go on the market over the next few weeks, particularly as spring progresses. That gives me some leeway to do some desk research, go to some property inspections and watch some auctions to get acquainted with the property market. Hopefully by the time I receive my pre-approval from the bank, I will be ready to enter the property market and buy my first home as soon as possible.