Analysis of the quarter by the Real Estate Institute of Victoria (REIV) claims the median house price in the Victorian capital city grew 3.6% to $725,000 in the three months to June.
Geoff White, REIV chief executive officer, said the quarter proves Melbourne to be the nation’s most resilient property market and though growth may have slowed somewhat conditions are still positive.
“Just over a year ago we were seeing quarterly price growth just above 5%,” White said.
“While growth is now below 4%, it is still solid, given market conditions,” he said.
For Ben Kingsley, director at property investment advisory firm Empower Wealth, the fact that Melbourne has enjoyed another three months of growth came as somewhat of a surprise.
“It’s really held up well and it’s even surprised me in regards to how well it’s held up,” Kingsley told Your Investment Property.
“This is not just over the short term either. If I take a 10-year view of the Melbourne market, it’s been a very, very solid performer,” he said.
In terms of drivers, Kingsley said it’s likely the strength of economic conditions in Melbourne, which is currently benefiting from high levels of residential and infrastructure construction and the transition away from the mining boom, that are behind the continued growth.
But while Melbourne will likely to continue on along with Sydney as one of Australia’s economic powerhouses, Kingsley isn’t quite so sure the market will continue on its current trajectory.
“It’s an interesting situation and the reason why is because we’ve never seen interest rates this low before,” he told Your Investment Property
“We’re in a bit of unchartered territory in regards to how much more this cycle has in it. My conservative nature makes me not as confident as some that the cycle will continue into 2017 and onwards.
“But again, we’ve never had to asses it against such interest rates. I suspect once interest rates start to stabilise and potentially go higher… then we’ll start to see prices correct themselves a little.”
While interest rate could prove to be the growth cycle’s handbrake, Kingsley said there current state means many people still have the ability to enter the market in Melbourne in spite of the city’s sustained rate of capital growth.
“If you actually look at housing affordability based on those sorts of measures then it doesn’t look like affordability has changed a lot at all over the last 10 years.
“The reality is though that if I was a single person or a one income household I would have some affordability issues.
“For households that do have two incomes and job security, we’re seeing more and more people try to get out of the rental market and into their own property.”
While Kingsley said demand for property remains strong in Melbourne, he also said there is currently a shortage of stock on the market, though as year moves on that might be corrected.
“On the existing property side we’re not seeing the level of stock we need to make the market more stable.
“I have no doubt the uncertainty around the election and who was going to govern had an impact on people’s decision making.
“There was a lot of concern about negative gearing, the construction industry and superannuation. But now we start to see most of that stuff bedding down and the Liberal Party winning government in their own right will probably see a bit of business as usual, which probably isn’t a bad thing.”