In news that surprised some property pessimists, the latest REIV December quarter medians confirm strengthening demand and an increase in housing prices in Melbourne.
According to the REIV the median house price in Melbourne increased by 7.8 per cent to $555,000 from $515,000 (revised) in the September quarter.
The median price for units and apartments increased by 4.2 per cent to $456,000 from $437,500 (revised).
REIV CEO Enzo Raimondo said that “strengthening demand has resulted from a combination of improved Victorian consumer confidence, four interest rate cuts and the seasonal increase in activity in the December quarter.
“Underpinning this increase has been an estimated 16 per cent increase in sales transactions in Melbourne compared to the December quarter in 2011.
“Overall transaction numbers remain low in historical terms and that may cause some ongoing fluctuations, but if improvements in confidence continue 2013 will see improved activity and an increase in sale values.
“Some of the higher increases in demand were recorded the more expensive suburbs where buyers have found significant value: Kew, Brighton East, Essendon, Hawthorn, Glen Iris and Fitzroy North. These suburbs recorded very strong clearance rates as buyers competed for well priced property.
“The stronger growth in the upper end of the market is a reflection of the larger falls in prices recorded in 2011. Healthy growth was also recorded in the more affordable market segments with the median increasing by 4.5 per cent in middle suburbs and 3.6 per cent in the outer suburbs.
“Abbotsford has become the first suburb with a million dollar median unit price as a result of 20 sales valued over $1m in one current development. This will likely drop below a million in later quarters.
“Overall house prices in regional Victoria remained stable with a median of $305,000. However key centres continued their steady performance with the median in Geelong increasing by 8.1 per cent to $395,000: by 4.7 per cent to $310,000 in Bendigo and by 1.8 per cent in Ballarat to $290,000,” Mr Raimondo concluded.
The Melbourne property markets are very segmented. There seems to be more signs of life at the more prestige end of the market that languished for the last few years.
However, there is still an oversupply of properties in certain areas, particularity in the new house and land market in Melbourne’s outer suburbs.
Regular readers of by blogs would know I’ve been concerned about the large number of new and off the plan high rise apartment projects in the Melbourne market.
Strong demand for overseas (mainly Asian) buyers has meant that many of these apartments have been sold off the plan, often at what locals would consider inflated prices. This has appeased lenders and construction of these projects is going to take place. This may lead to an oversupply of rental properties and flat rental growth over the next few years.