Melbourne Looks Like It's Setting A Price Recovery Trend
One month’s statistics do not make a trend. Three months, however, arguably does and a pattern of rising property prices is beginning to emerge in Melbourne.
With the median price for houses hitting $710,151 (units $530,923) according to the latest CoreLogic August figures, the gap has been closing since an earlier decline from its November 2017 peak.
The median property value is now 9.5 per cent below that benchmark level, performing strongly on the back of low levels of quality stock and multiple buyers.
A very strong market for rental properties this year has seen the vacancy rate slip below two per cent, encouraging investors to pursue relatively attractive yields.
According to Steve Janes, aussieproperty.com director, investor activity noticeably increased in August.
“Improved demand and low stocks for sale will almost certainly have an upward pressure on values, which is already being seen, most noticeably with the higher quality properties,” Mr. Janes said.
Spring invariably brings a blossoming supply of properties onto the market. But investors seeking improved returns on investment are expected to absorb any additional listings, according to Mr. Jane.
“All the drivers indicate a much safer investor environment to start or grow a portfolio and I suspect the risk here is on those who wait for prices to fall,” he said.
The tight supply of Melbourne properties was cited by Real Estate Buyers Agents Association of Australia (REBAA) president Cate Bakos as a key driver of the market.
“Not unlike most other winters, buyers seem to have forgotten that the typical supply and demand factors at play are soon to be turned in their favour,” Ms. Bakos said.
“The surprise election and consecutive interest rate cuts seem to have buyers scrambling for property and many are breaking records and paying top dollar in fear of being priced out of their desired markets.”
She said auction properties for spring’s pre-school holiday weekends were already hitting the search engines and it was apparent buyers would have more stock to choose from as listings continued to roll out.
“Opportunities to purchase properties prior to auction are diminishing as vendors watch healthy sales results and make the decision to capitalise on the positive market conditions.
“Buyers are best advised not to break land-speed records in an attempt to secure a property before auction as we head into spring, and for two reasons: firstly, a bank valuation shortfall is a genuine risk if the purchaser pays a price substantially higher than a bank valuer would determine is appropriate, and secondly, the easing conditions, due to an equilibrium in supply and demand during spring, is likely to give way to some softer auction conditions for buyers.”
As lenders are adjusting their servicing buffers and passing on rate cuts, those who have not arranged pre-approval should do so, she said.
“They may find they are pleasantly surprised with their adjusted borrowing capacity.”
Rental affordability in Victoria improved over the June quarter, with the proportion of income required to meet median rent decreasing to 23.0 per cent, a fall of 0.1 percentage points over the quarter and a 0.3 per cent over the previous year.
Housing affordability remained steady in Victoria with the proportion of family income devoted to meeting average loan repayments at 32.5 per cent.
The number of loans to first home buyers in Victoria increased to 8,500, an increase of 18.0 per cent over the quarter but a decrease of 5.7 per cent compared to the June quarter 2018.
Melbourne in numbers – August 2019