It will come as no surprise to local home buyers and investors that a recent report suggests Melbourne will boast 100 suburbs with million dollar price tags by the end of 2014.
This represents a more than doubling of the current 44 neighbourhoods that the Real Estate Institute of Victoria has recorded as having a seven-figure median price tag and comes off the back of a report in UK based The Economist magazine that claims Australia’s housing is the most over-priced in the developed world.
According to calculations from the Herald Sun, the number of million-dollar suburbs will rise to close to 400 within the next two decades. This is based on an average per annum increase in Melbourne’s residential property prices of 7.6% since 1926, as recorded by AMP.
This data indicates that homes currently worth $400,000 will be at the $1 million mark in 12 years, while properties that now fetch $600,000 will be worth $1 million in 6 years.
Although these numbers might seem extreme, when you consider that more than 5000 properties sold for $1 million plus last year – three times more than in 2005 according to the REIV’s Robert Larocca – this is not such a far fetched prediction.
“The history of Melbourne property prices demonstrates solid returns and while we won’t see 20 per cent gains such as we saw last year, solid growth is likely to continue into the future,” Mr Larocca said.
Even suburbs traditionally considered “affordable” are set to become the realm of millionaire purchasers in coming years. The south east town of Dandenong, where the 2010 median was $435,000 is expected to hit the million dollar mark by May 2022, while relatively inexpensive Carrum Down (2010 median of $335,000) is projected to have a $1 million median by 2025 and Frankston’s 2010 average house price of $368,000 is tipped to be up in the seven figure ballpark by 2024.
AMP Capital chief economist Shane Oliver has warned the next generation will struggle to afford a home.
He says if prices continue to rise, the notion of home ownership, “will become an increasingly unrealistic goal.”
“The only hope many will have is to inherit one from their baby boomer parents later in life.”
Source: Herald Sun