The dream of home ownership is slipping away from more young buyers as Melbourne’s already expensive house prices soar to new heights.
Many will continue to battle predicted price rises this year, compounded by tougher lending rules, low income growth and rising rents.
House prices have grown every quarter for just over four years, with the latest 3.6 per cent rise pushing the city’s median to $795,447, the Domain Group’s rental and house price report shows.
A typical unit buyer will also have to dig deeper: the median jumped 2.3 per cent to $459,181 over the December quarter.
This time last year, the median house price was $719,486: a jump of 10.3 per cent over 2016. The growth from 2015 to 2016 was 14.5 per cent.
Domain Group chief economist Andrew Wilson has forecast house prices to climb another 4 to 5 per cent this year.
Dr Wilson pointed to strong growth in lower and mid-priced areas, low wages growth and rising rents as factors that would make it more difficult for first home buyers to save a deposit. Strong migration would continue to drive the market, he said.
Alan Viney, 29, and partner Suzie Bentley, 26, recently bought an unliveable house in Preston. The couple quickly found they were priced out of Northcote and Thornbury, so lived with their parents, worked multiple jobs and knuckled down to save for about four years by eating out less and cherry picking social events to attend.
Mr Viney said living with their family was the only way they could buy the house last July.
“In the end, we bought a house that was in complete disrepair and unliveable — with no doors and windows,” the primary school teacher said.
“We’ve knocked it down and we’re investigating the process of building.”
First Home Buyers Australia co-founder Daniel Cohen said first home buyers feared prices would continue to rise, and many bought as soon as they had a minimum deposit.
“It has never been harder to buy your first home,” said Mr Cohen, who expected first home buyer activity to fall in 2017 and 2018.
Rising house prices would also push more properties out of the $600,000 threshold, where first home buyers are eligible for a 50 per cent stamp duty concession.
First home buyers battled the steepest price rises in the west, with the median house price climbing 16 per cent over 2016.
Barry Plant Sunshine director Jason Allen said central Sunshine was becoming out of reach for more buyers. First-timers were “getting a bit disgruntled with prices”, he said, and pushed to nearby pockets such as Ardeer, Albion and parts of West and North Sunshine.
The strong market meant more properties went to auction, which was hard for young buyers trying to compete against developers and investors, Mr Allen said.
Nelson Alexander Brunswick sales director Duncan McPherson said older-style units offered opportunities to get into the market.
For about $500,000, first home buyers could consider a villa unit or a two-bedroom unit in a small block in the inner north, such as Brunswick, Northcote, Thornbury and Coburg, he said.