Strong buying at the lower end pushes Melbourne property prices higher

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Melbourne's median house price climbed by 3.1% in 2008, thanks to the strong demand in the lower-tier of the market according to a new report.

The median house price rose 7.6% in the lowest priced segment of the market compared to 0.3% in the top end, said the Real Estate Institute of Victoria (REIV). The figures marked a stark contrast from 2007, when prices increased 11.3% and most growth occurred in the middle.

In 2007, only one of the 20 fastest growing suburbs was priced below the Melbourne median, compared to 13 in 2008, said REIV CEO Enzo Raimondo. He said the numbers served as confirmation of what many already expected - first homebuyers were driving growth in suburbs such as Laverton, Dandenong, St Albans, Sunshine and Watsonia.

The median in suburbs at the top end of the residential market slumped, however. Toorak remains Melbourne's most expensive suburb, despite dropping 7.3% to $2.6m, said Raimondo. Others, such as Canterbury and Brighton, also showed major drops in prices despite increasing 30-35% in 2007.

"The result is quite good given the continuing difficult economic conditions, and it appears the interest rate reduction and stimulus package introduced late last year are starting to have the desired effect," said Raimondo.

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