Melbourne housing affordability 2025: First-home buyers’ given ominous 14-month deadline – realestate.com.au

30 Exford Rd, Melton South, is for sale for $580,000-$620,000. It is one of only three suburbs that are predicted to be accessible for first-home buyers by 2025.

Melbourne first-home buyers could be priced out of all but three of the city’s most affordable suburbs for houses in as little as two years.

Consultancy firm KPMG property price forecasts show Melbourne’s median house price could surpass $1m by June 2025 to hit $1,024,495.

Applied to suburban PropTrack data, the forecast price hike will leave just Melton, Melton South and Coolaroo with median house prices below the state government’s current $600,000 cap for waiving stamp duty costs — Victoria’s most expansive program to help young home buyers.

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Less than 10 per cent of suburbs will be accessible for first-timers under the current $750,000 threshold for stamp duty concessions and the $10,000 first-home owner grant.

KPMG chief economist Dr Brendan Rynne said the predictions were based on a range of factors likely to continue pushing property prices up including a lack of housing supply.

“Despite high interest rates, constrained supply will likely dominate the factors influencing property prices in the short term and result in continued price gains,” Dr Rynne said.

“House and unit prices will then accelerate further in the next financial year as dwelling supply continues to be limited, due to scarcity of available land, falling levels of approvals and slower or more costly construction activity.”

KPMG chief economist Dr Brendan Rynne.

Other contributing factors included higher demand as a result of heavier migration, anticipated rate cuts in the 2025 financial year, potential relaxed lending conditions, more renters looking to buy due to increased rents, and foreign investor demand.

Mortgage Choice broker David Thurmond said to afford a deposit for a $600,000 home, buyers would need an income of at least $75,000-$80,000 a year.

“And that’s assuming you have no children, are single and don’t have any debts,” Mr Thurmond noted.

“When you start throwing in normal life situations like car loans, credit cards or kids, then the requirements increase even further.”

The mortgage broker said he was expecting Melbourne’s most affordable property prices to “take off like a rocket” over the next two years and that caps on government homebuying programs needed to be adjusted accordingly.

19 Riddle Drive, Melton, is currently on the market with a $419,000-$459,000 price guide.

In Coolaroo, 10 Ventnor Cres is up for $540,000-$560,000.

“The numbers are probably a decade old and need to be adjusted otherwise you’re going to push people further and further away from metro areas,” he said.

Dr Rynne added that state governments across the country needed to review first-home buyer caps regularly — at least every three years — to reflect the demographic’s purchasing power.

“The short term fix could be that you lift the cap for first-home buyer support to another threshold and escalate it by an amount that reflects the general price escalation so they’re still targeting properties at the lower cost spectrum,” Dr Rynne said.

However he noted that planning reform was the “much better” long-term solution to the nation’s housing crisis.

“Inner and middle ring suburbs need planning reform that allows for an increase of density in housing stock in all main capital cities,” the economist said.

“Every state government needs to address this — they are aware of the housing crisis but what we need to do is see if there are some short term solutions mixed in with proper long term structural change.”

With home prices continuing to rise across Melbourne, PropTrack senior economist Eleanor Creagh said the deposit hurdle, the largest to home ownership and a key barrier for first-home buyers, had increased as interest rates rose.

“This means more time to save for a deposit, making entering the market less accessible for many first-time buyers,” Ms Creagh said.

PropTrack senior economist Eleanor Creagh.

“At the same time, interest rates are higher, borrowing capacities have reduced significantly and mortgage servicing costs have increased.

“As a result, affordability has deteriorated markedly, and is likely to remain stretched, with home prices expected to keep rising.”

She added that the government was not currently building enough homes to hit the national cabinet’s goal to build 1.2 million homes in the next five years.

“With Australia’s population set to keep growing over the next two decades, building more new homes where people want to live will be critical if we are serious about tackling housing affordability,” Ms Creagh said.

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emily.holgate@news.com.au