The capital city of the state of Victoria, Melbourne has seen the greatest increase in population of any Australian city over the past decade. It is increasingly well known as a crucible for creative industries, for its vibrant street art and as a growth hub for new technology start-ups.

Economic growth is robust in the state of Victoria, which recorded its strongest economic performance since 2009-2010 in Q2 2018, with 5% growth in state final demand (SFD), a broad measure of demand for goods and services in the Australian economy.

First time buyers continue to be active in the market, with the annual share of owneroccupied dwellings financed for first home buyers in Victoria at 18.7% in 2018. This was the highest annual share in four years and up from 14.6% in 2017.

However, Melbourne’s housing market has begun to cool following many years of strong growth. Although transaction volumes remain high in relation to long-term trends, activity is now slowing.

This has been driven in part by a tightening in the mortgage markets, in particular higher mortgage rates and less credit available for investors. As a result, the investor share of total borrowing has declined to 42% in 2018 from a peak of 52% in mid-2015.

The slowdown in demand has taken the pressure off house price growth, a welcome trend in Melbourne where affordability constraints have increased significantly over the last few years. Cities outside Melbourne within commutable distance are now reporting strong performance, while commuters and investors gravitate to more affordable areas such as Geelong and Ballarat.

Predictions show Melbourne’s population continuing to grow over the coming years and this will continue to support the housing market. Despite this, however, it appears increasingly likely that the extent of the price correction looming in Melbourne will mirror Sydney.

What you can buy in Melbourne: Melbourne Square

Set on 25,000 sq m of prime city fringe land, the first phase of this large mixed-use development comprises two luxury residential towers of 1, 2 and 3-bedroom apartments and penthouses.

Address: Corner Power & Kavanagh Street, Southbank
Status: Under construction, first stage settlements in Q4 2019
Number of units: 1,043
Average price: $725psf (USD)
Developer: OSK Group
Architect: Cox Architects with Carr Interior Design

The residents will enjoy large community facilities including a large open-air swimming pool on the 8th floor podium alongside a terrace and garden. A gym, spa and indoor pool will feature on the 54th floor. Other amenities include private dining and games rooms, as well as hotel style services such as house-keeping. The first phase also comprise 4,000 sq m of parkland, a shopping centre, super market, café and restaurants at ground level. Phase one is already 70% sold out.