Melbourne's housing past, housing futures

This paper examines trends in house prices and affordability in Melbourne. Using previously unpublished, detailed data from the Victorian Valuer General's Office, we plot price movements by suburbs, and locate these changes in the context of broader economic and policy developments. We show that during the 1990s approximately one-third of Melbourne's suburbs experienced real price increases of up to 87 per cent, while another third experienced real falls of up to 29 per cent. Those suburbs whose residents experienced the fastest growth in after tax incomes also enjoyed the fastest growth in house prices. The price increases were concentrated in the inner city, while price falls occurred in the outer suburbs. We offer an explanation for these trends, and extrapolate from them to offer some thoughts on likely price and affordability developments in the coming decade. We conclude with a discussion of the policy implications.