Melbourne's housing market could be set for a change in fortunes later this year, according to Urban Property Australia. 

The city's home values have declined over the past 12 months, due partly to a tightened lending environment and easing consumer confidence levels.

However, Urban Property Australia believes a mix of Victoria’s nation-leading population growth and a likely cut to interest rates will lead to a stabilization of Melbourne's housing market in the second half of 2019.

Urban Property Australia Founder and Managing Director, Sam Tamblyn, said that while there are some headwinds for the housing market, UPA research predicts that Melbourne residential prices are nearing their base with a result of the upcoming Federal election and the relaxation of lending criteria from banks likely to provide some positive stimulus for the housing market later this year.

“Despite negative sentiment around the Inner-City Melbourne apartment market, apartment prices have been relatively resilient to date, reflecting the strong rental demand and housing affordability pressures," he said.

Urban Property Australia’s research forecasts that the supply pipeline has peaked in the short term, with a number of projects previously being actively marketed have been withdrawn.

UPA research analysis reveals that 3,000 apartments have had their plans shelved with major residential developments recently withdrawn for other uses including the 555 Collins Street, 85 Spring Street and 383 La Trobe Street projects.

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HIA Chief Economist Tim Reardon. Source: HIA

Despite this, Melbourne has still managed to dominate the Housing Industry Australia's Hotspots Report, with 12 of Australia’s Top 20 building growth areas all located around Victoria’s capital.

Released last week, the report aims to find employment growth areas targeted towards builders and tradies and identifies hotspots in all states and territories.

According to the data, Rockbank - located in the west of Melbourne near Melton - is Australia’s number one Hotspot, with population growth of 59.4 per cent during 2017/18 and $224.2 million in building approvals.

HIA Chief Economist Tim Reardon said the results were not surprising given the significant investment in infrastructure and the region’s growing professional services sector.

“The majority of the growth is in the fringe of Melbourne as the city expands, although inner city suburbs such as Southbank and Docklands are also enjoying strong growth as they change to accommodate higher density living,” he said.

“Major infrastructure projects including upgrades to the train station and train lines as well as a new six-lane arterial road connecting the area are expected to maintain the momentum to keep the area as a hotspot next year." 

Click here to see more contributions from Tim Reardon.

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