The Melbourne property market has had a strong run once again through 2010 as many had thought there was going to be a slowdown from previous years of strong growth. One contributor to the continued support for property prices increasing in Melbourne has been the strong population growth. While this has helped fuel the need for more dwellings and helped boost economic growth, a small slow down is unlikely to have any harsh effects. The strong population growth has been largely concentrated in the capital, Melbourne. Melbourne has seen 80% of the population growth while regional areas outside of Melbourne have seen the remainder over the last 7 years.

First Home Buyers in Melbourne slowed through 2010 as expected after stronger than expected results in the second half of 2009. Previously there had been larger incentives on offer for first home buyers and during this time more would have entered the market than average. Since these incentives have been reduced first home buyers in Melbourne have fallen away.

Property Investment in Melbourne surged in the first half of 2010 as strong growth from 2009 attracted more investors in 2010. The Melbourne property market is expected to remain active through 2011.

As first home buyers fall out of the market, this is likely to put pressure on rents. This was seen in the second half of 2010 and is expected to continue in 2011 as demand increases. Melbourne is still comparatively cheap to rent compared to other major cities in Australia. There is a strong chance that we should see rents in Melbourne rise significantly over time to catch up to be in line with other cities around the country.

Moving forward in 2011, capital growth of property in Melbourne is expected to stabilise with the huge growth seen through 2009 and 2010 not expected, although some growth is to be seen.

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Source: Westpac 2010 – 2012 residential property report