House prices in Melbourne's eastern suburbs on a roller coaster, but young people don't get to ride

The statement “Young people won’t be able to buy a home” seems to be an inescapable truth.

A recent Household, Income and Labour Dynamics in Australia (HILDA) Survey showed two thirds of all Australians believed young Australians would never be able to afford buying a home.

According to recent CoreLogic research, national home values have been on a roller coaster ride since the start of the Covid pandemic in March 2020, rising by a cumulative 38.4 per cent, adding approximately $227,000 to the median dwelling value.

On the other hand, Australian wages have risen by less than half the increase of housing since the onset of Covid.

So, what has this meant for local housing prices, and what’s next for the local housing market?

How did Covid impact house prices in Melbourne?

CoreLogic Asia Pacific head of research Tim Lawless said a variety of factors contributed to Melbourne’s low growth, including a more significant disruption to economic activity through the pandemic due to more severe lockdowns and a dive in interstate migration.

“Dwelling values in Melbourne have risen by just 8.4 per cent since March 2020, by far the lowest cumulative growth rate of any capital city,” he said.

Lawless said Melbourne’s buying market was not as stable as its rental market during the past five years.

“Once international borders re-opened, Melbourne saw housing demand pick up as overseas migration surged, but most of this demand was centred in rental markets due to the short-term nature of most migrants who were here to study,” he said.

“Investor demand has generally been weaker than average across Victoria, reflecting the stronger growth prospects in other markets that were more attractive to investors, but also a higher property tax regime that has likely disincentivised investment.

“Victoria has also shown a higher per-capita number of dwelling completions since 2017, a reminder of how a healthier level of new housing supply can help to keep a lid on housing affordability.”

How has the eastern suburbs coped recently with median price changes?

Glen Waverley was among the highest median prices across Melbourne’s eastern suburbs, with a median price of $1.6 million as of the final quarter of 2024, a 31.1 percent rise compared to $1.22 million in the second quarter of 2020.

Box Hill’s October to December 2024 median sale price was also $1.6 million, a 14.3 per cent rise compared to $1.4 million recorded in the first quarter of 2023 and a 9.6 per cent drop compared to $1.77 million recorded in the second quarter of 2023.

Bayswater was among the most affordable suburbs with a median Q4 sale price of $890,000, a 28.1 percent increase compared to $695,000 recorded in the third quarter of 2020 and a 16.8 percent decrease compared to $1.07 million recorded in the first quarter of 2022.

What’s next for the local housing market?

The State Government’s proposed "Activity Centres” in areas including Ringwood and Chadstone are set to bring 60,000 new homes close to services, jobs and public transport.

The government’s Plan for Victoria is also setting out targets for new houses across each of the LGAs.

While it is yet unclear what this new supply would mean for prices, grassroots housing advocacy group YIMBY Melbourne has welcomed the new plan, saying it would lead to a more diverse range of options for prospective homebuyers.

"It is great to see an ambitious Plan for Victoria emerge at the end of this process,” lead organiser Jonathan O’Brien said.

"We look forward to seeing the activity centres and housing targets rolled out across the state, and for Victoria to leverage planning system reform to continue leading the nation in homebuilding."