Along with the global economy, the Australian economy has softened with annual growth easing to its lowest rate in two years. Despite strong employment conditions, recent declines in the housing market have led to downward revisions to Australia’s economic outlook.

Adversely impacted by the tightened lending environment and easing consumer confidence levels, the Melbourne home value index has declined by 12.4% over the year to March 2019. However, with Victoria’s nation-leading population growth coupled with a likely cut to interest rates, Urban Property Australia anticipates the Melbourne housing market to stabilize in the second half of 2019.

Despite the volume of apartment transactions decreasing, Inner Melbourne median apartment prices have been relatively resilient to date, reflecting the strong rental demand and housing affordability pressures. Looking ahead with the supply pipeline diminishing, values are likely to be supported from significant declines with population growth projected to remain robust.

Victoria’s office markets are Australia’s best performing office markets with most vacancy rates at 10-year lows. The vacancy rate of the Melbourne CBD is the lowest of all Australian CBDs while the St Kilda Road and City Fringe precincts continue to attract investor demand buoyed by the robust rental growth.

With the reliance and need for more logistics space at an all-time high, occupier and investor demand remain robust. Melbourne’s strong projected population growth will continue to boost trade activity and e-commerce and retail sales which has been a significant driver of industrial take-up recently.

Looking ahead with e-commerce expected to continue to increase, rental growth will remain subdued for retail assets while as a result of increased investor caution, there is an increasing likelihood that yields for retail assets will ease from the record low levels.