‘Forced to sell’: Expert’s chilling warning

Is Melbourne’s property market losing its shine?

The Victorian capital used to have the second most expensive housing in Australia.

But now Melbourne comes in at sixth place.

Believe it or not, property in Melbourne is now cheaper than property in Sydney, Brisbane, Perth, Adelaide and Canberra.

Darwin and Hobart are now the only cities where property is more affordable than in Melbourne.

This could be bad news for the Sydney market.

Sydney house prices usually follow the Melbourne market in lock-step.

So perhaps Sydney is next on the chopping block.

But I suspect the difference could all come down to supply.

Victoria has built more houses than the rest of the country over the last two decades.

The state has completed 825,000 homes since 2010.

That’s about 100,000 more houses than what the next-best state, New South Wales, built.

That’s why there are more listings in Victoria than in New South Wales and other states.

Remember, the more listings there are in the market, the lower prices tend to go, because there’s less competition.

Victoria’s high-tax regime is another factor that explains why Melbourne’s housing market is losing its shine.

Last year, the Victorian state government introduced a new tax on investment properties.

Mum-and-dad property investors now have to pay an annual $975 fee plus 0.1 per cent of the value of their land above $300,000.

So say you buy an $800,000 house in Melbourne – under Victoria’s new tax rules, you’ll be up for an extra $1475 in tax a year.

No wonder property investors are fleeing Victoria.

The tax was actually brought in to pay for the cost of the Victorian government’s infamous Covid lockdowns.

This is another core consideration.

There is no doubt that Victoria’s Covid lockdowns have contributed to the Melbourne market’s stagnation.

A whopping 60,000 Victorians ditched their state during the Covid lockdowns – presumably because of how harsh they were relative to other states.

This outflow of people has increased supply in the Melbourne market – and put downward pressure on prices.

The question is, who will be next?

With Australia’s construction sector in meltdown, it’s hard to see the supply of housing increase in any meaningful way any time soon.

So don’t expect any supply-led solution to the housing affordability crisis.

Demand is also high.

Population growth – which is fuelled by mass migration – is still at near-record highs.

The only risk for property prices is the Reserve Bank.

If the Reserve Bank continues hiking interest rates, some mortgage holders will be forced to sell.

That will result in a glut of supply and a panic.

But the Reserve Bank won’t want to be blamed for that.

So it’s most likely they will continue trying to walk the line between going too far – and going too light on inflation control.

That means holding rates for a while.

And meanwhile, property prices will continue to rise slightly – or stagnate.

Mark Bouris is the executive chairman of Yellow Brick Road Home Loans