But retired secondary school teacher Jill and her husband Peter, founder of IT company Fenwick Software, who are planning to move into an apartment currently under construction just 200 metres down the road, are undeterred by the current market.
“I do think that property prices have been affected, but inner city suburbs are a strong market and they always have capital gains,” Mrs Fenwick said.
“In East Melbourne we are only a 20-minute walk from Collins Street, a 10-minute walk from the MCG as well as the soccer centre and tennis centre and you could walk to the art gallery across the gardens, so it’s a very special place,” she added.
Buyers face more scrutiny
The cottage, built in 1860, is one of the oldest houses in East Melbourne, and one of a small number of double-fronted, single-storey Victorian residences in the area.
Despite price falls in the inner-city region there was still strong demand, according to selling agent Paul Caine, who said the main obstruction to strong sales was thebanks’ tightening of credit to borrowers.
“It’s a peculiar market in that it’s undersupplied and there’s lots of interest, but primarily because of the price level, banks [as a result of] the royal commission are being more rigid with their lending requirements – buyers have to come to the table with more equity than they might have had to two years ago,” Mr Caine said.
“We are dealing with a professional contingent – the buyer demographic tends to be anywhere between 40 and 60 years of age, they are medical and legal professionals, they are generally highly paid but if anything they are under a bit more scrutiny than mum and dad buying a $500,000 or $600,000 house in the suburbs.”
Mr Caine said mostly everything in the area was selling but that it was “just taking longer for people to get their ducks in a row”.
Recent price falls in Melbourne and Sydney have been compounded not just by a retreat from investors but also a drop-off in owner-occupier activity and an increase in property stock levels, with listing numbers in Sydney up by about 20 per cent, according to CoreLogic’s head of research Tim Lawless.
Recent lending figures reported by the Reserve Bank of Australiashowed that towards the end of 2018investment mortgage borrowing grew by just 1.1 per cent, the slowest annual pace on record.
While banking regulator APRA removed its investor lending caps in December,experts anticipate it will have little effecton the market in the current environment where major banks have imposed stricter lending standards for borrowers.
Hobart strongest capital
Across the country Darwin also contributed to an overall weaker market with prices dropping by 1.8 per cent over the month, followed by a fall of 1 per cent in Perth and 0.2 per cent in Brisbane.
Canberra prices remained flat over December and increased slightly by 0.6 per cent over the quarter, while in Adelaide prices grew by 0.5 per cent over the quarter.
Perth property prices are yet to hit rock bottom with values falling 2.5 per cent over the quarter and 1 per cent over December.
“Perth was looking like it was levelling out but it has certainly taken a bounce backwards – Perth’s recovery is really reliant on improved migration rates and also continued strength in commodity markets and a rise in infrastructure spending,” Mr Lawless said.
Hobart continued its run as the strongest capital city market but growth slowed towards the end of the year. Prices grew 8.7 per cent over the year and 2 per cent over the December quarter.
“I think we’ll see Hobart gradually lose its stream … we are already seeing growth leave the market and by end of 2019 we might see Hobart start to level out,” Mr Lawless said.
While Mr Lawless expected further price falls across Sydney and Melbourne in 2019, he anticipated they would stabilise.
“Absolutely we will continue to see values falling … but it will be surprising if we see an acceleration of decline [in 2019],” he said.