The Melbourne suburbs that have had the biggest increase in prices since rate cuts began earlier this year have been revealed.
House prices have jumped at least $10,000 in 150 Melbourne suburbs since interest rates were cut in February and another clip on Tuesday could fuel a further surge.
But, in an unexpected twist there are even more suburbs that have yet to respond to the two reductions, with expectations it could take at least two more for a wholesale boom to kick off in the city.
Economists are blaming Melbourne’s “laggard” response on the state of the Victorian economy, which is being described as recovering from “trauma”, and following a pattern last seen during a rate cutting cycle after the Global Financial Crisis and during the nation’s 1990s and 1980s recession years.
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But the suburbs that are booming are doing so well that they’re dragging the overall city’s median house values up with them.
PropTrack data shows one of the biggest winners since the Reserve Bank’s February cut is Canterbury’s lofty $3.5m median house price, up an eye-watering $385,000 in five months.
Bittern on the Mornington Peninsula’s $1.18m typical house now costs $210,000 more than it did in February, while Gembrook has surged into the million-dollar club — up from $910,000 to $1,049,800.
Canterbury homes are on the winners list after interest rate cuts, with this one sold for $3.24m since the first cut was made.
AMP Capital economist Shane Oliver believes Melbourne’s “laggard” response to rate cuts could reflect economic trauma across Victoria not being felt interstate.
Units in some areas are also responding with Sunshine’s typical flat gaining $54,500 to reach $458,000 since February, while townhouses have helped add $112,500 to Hampton East’s now $975,000 typical cost.
The PropTrack data shows they’re among the 173 suburbs have recorded gains since the February 19 rate cut, though some were fractional with as little as a 0.06 per cent improvement.
Rate Cut Winner Suburbs So Far
Bittern: $1.18m — up $210,000 (21.65%)
Gembrook: $1,049,800 — up $139,800 (15.36%)
Canterbury: $3.5m — up $385,000 (12.36%)
Clarinda: $1.095m — up $117,000 (11.96%)
Burnside: $795,000 — up $83,000 (11.66%)
Carlton North: $1.68m — up $165,000 (10.89%)
Carrum: $1.016m — $96,000 (10.43%)
Balnarring: $1.45m — up $130,000 (9.85%)
South Kingsville: $1.16m — up $102,500 (9.69%)
Bunyip: $772,500 — up $67,500 (9.57%)
Figures reflect median house price increase from February to July, where at least 30 sales were recorded — but could have been influenced by changes in types of homes being sold
Source: PropTrack
Meanwhile, 32 suburbs have recorded no change, and 162 have declined.
Respected AMP Capital economist Shane Oliver said on the surface, Melbourne’s response to the rate cuts so far was “surprising” — but likely reflected a market that was “still a bit shaky” as a result of a poorer performing economy than other states.
“We are starting to see some movement, but it’s consistent with Melbourne being a bit of a laggard,” Mr Oliver said.
Bittern on the Mornington Peninsula has had a growth spurt in home values over the past five months. This property sold recently for $1.69m.
In Carlton North this recently sold home gives an idea of what buyers get for $1.75m, just above the suburb’s new median house price after a post rate-cut growth spurt.
Key reasons included the Victorian economy being ranked as among the poorest performing in the nation by AMP Capital, the Victorian government’s implementation of additional property taxes which had contributed to diverting investor attention, and because homebuyers were so far largely resisting the fear of missing out permeating many other cities.
Mr Oliver said Victoria’s response to rate cuts so far was closer to those during times of economic trauma and recession, such as the late 1980s, the 1990s and after the Global Financial Crisis.
“When you have more economic trauma, that’s when you see a slower response to rate cuts,” he said.
“But, historically the lower rates will win out eventually.”
Affordable suburbs like Burnside have also been recording significant gains since February 19. This home sold for $830,000 recently.
PropTrack senior economist Anne Flaherty has warned a slow recovery in Melbourne is a warning sign about the Victorian government’s property tax regime.
PropTrack senior economist Anne Flaherty said the slow response despite nation-leading population growth was a “pretty big warning sign” about the state’s property tax settings — one of the key things differentiating it from other major capitals where prices have surged.
“Those areas that are outperforming are those that are feeling stronger owner occupier demand,” Ms Flaherty said.
“A lot of the top ten are desirable areas and would appeal to people on above-average incomes.
“But what this data really clearly shows is that property prices in Melbourne are moving at different speeds in different areas.”
However, the economist noted she was still anticipating a “strong recovery in most suburbs” and further rate cuts, including one that PropTrack is anticipating will be announced this Tuesday, will be key to that growth.
A Carrum house that sold for $1.055m recently, just above the median price which has surged in the past five months.
Property Home Base founding director and buyers agent Julie DeBondt-Barker has buyers who are still happy to wait for the next listing and aren’t “feeling the FOMO”.
Ms Flaherty said worsening unemployment data would be key to confirming the cut, particularly notable in Victoria where the figures are higher than other states.
“It could be more risky to not cut at this point,” she said.
Property Home Base buyer’s agent Julie DeBondt-Barker said Melbourne’s slow uptake could also reflect that “buyers are not feeling the FOMO”.
With seemingly limited fear of missing out on home opportunities, Ms DeBondt-Barker said it wasn’t uncommon for many to be turning down homes even after six months of searching.
“They are still being fairly discerning, they still feel there ‘will be another one’,” she said.
“They are worried that interest rates will go down, but also that they will go up again. So there’s still big-picture thinking and nervousness. They might be able to spend $1.2m, but they only want to spend $900,000.”
A three-bedroom house sold for $1.2m in Balnarring recently showed there are still some homes selling below the coastal suburb’s $1.45m median price.
Real Estate Institute of Victoria acting chief executive Jacob Caine believes homebuyers are waiting for more rate cuts to drive action in Melbourne.
However, the advocate warned investors and especially those from other states were not of the same view.
Real Estate Institute of Victoria interim chief executive Jacob Caine said the data suggested Melbourne homebuyers were waiting for further cuts before they made a move.
“The reality is that despite two interest rate cuts so far this year, the cuts haven’t been big or frequent enough to genuinely stimulate wholesale growth across metropolitan Melbourne,” Mr Caine said.
“The past two have demonstrated that buyers and sellers are looking for more from a cut to the cost of living and debt servicing before they test the market or put their hand up at auctions.”
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