Price growth is easing but Melbourne remains the top performing market.
Melbourne’s stunning growth has certainly moderated over the past few months with median house values rising by just 0.33% to $593,500 in the month of August, according to Residex. However, its housing market continues to impress with its yearly growth of 16.50% – the highest in the country. Units also performed well with median values surging by 15.44% in the past 12 months.
Cameron Kusher, senior research analyst with RP Data, says that home values in Melbourne have outperformed the other capital cities over the year, with an increase of 13.6% – well above long-term average rates. “Like most markets, a slowdown has impacted the market over the last quarter with home values falling by 1.1% over the three months to July and increasing by 0.1% during the month.”
Ian James, director of JPP Buyer Advocates, says the Melbourne market is back to normal following the dramatic peaks and troughs of the past six months. Auction clearance rates have also declined to around 60% during early September. Supply and demand have levelled out in recent months to create a steady market in Victoria, adds residential services director with Landlink – Opteon, Andrew Mapleson.
“There are now signs that investors are returning to the market, with an increase in both property listings and buyer numbers. At the moment, with employment in Victoria still being strong and the forecasts around interest rates not being as volatile as first thought, I still think we’ll probably maintain a steady market.”
ANZ noted in its report that investors have picked up the slack left by first homebuyers, with the value of investor finance approvals rising by 42% over the year to June 2010.
Issues of stock
RP Data records that 10,664 new properties came onto the Victorian property market in the month of August, to reach a total of 39,027 – far lower than the 43,616 dwellings for sale this time last year.
James says that many real estate agents on the ground are still desperate for more properties within a 20km radius of the Melbourne CBD. In particular, inner-city apartments under $500,000 – prime fodder for first-time investors – are in chronic undersupply. He says if there isn’t a dramatic influx of new properties on the market soon, well-positioned one and two-bedroom units may experience a 3–5% rise in value, come November.
Mapleson adds that established blocks aren’t coming onto the market quick enough for demand, which is pushing prices up further. However, Victoria led the way with dwelling approvals in July, suggesting new stock may emerge in the future. The ABS recorded a huge 12.1% increase in Victorian dwelling approvals over the month – by far the greatest level seen across the country. The state also achieved positive growth in private sector house approvals, at 6.9%.
Economy in good health
The Victorian economy is believed to be in a state of good health, with Propell National Valuers’ report recording yearly growth well above the national average. The last 12 months of economic growth is the highest the state has experienced over the past five years.
Other positive indicators include strong retail turnover and population growth (2.8%), well above the national average of 2%. Unemployment has also decreased; Propell records a drop from 6% in 2009 to 5.4% in June. “The prospects for Victoria in 2011 are positive, with the economy growing at an above-average rate. While there are mixed signals for the year ahead, the market view is one of confidence in the medium term outlook,” Propell notes in the report.
Michael Ramsay, principal of Michael Ramsay Property and state representative for the Real Estate Buyer’s Agents Association of Australia (REBAA) in Victoria, says the Melbourne market had a stellar run in the 12 months to June, but this is unsustainable over the long term. He expects growth to continue at 8-10% pa for houses and 6-8% for units.