Melbourne property market is heading for a soft landing

Dr Andrew Wilson, senior economist for Australian Property Monitors suggested that their latest data includes some good news for house owners.

In an article on Domain he explained that the Melbourne median house price rose by 1.1 per cent over the three months to April this year, according to the latest data from Australian Property Monitors.

This rise follows a fall of 0.8 per cent in the March quarter and suggests some consolidation in buyer activity over April.

The top 25 per cent of the Melbourne market led the April price growth, rising by 3 per cent over the quarter. The April quarter median house price for Melbourne was $561,101.

Auction clearance rates have consolidated over the past few weeks and, although still well below the levels of 12 months ago, show positive signs of a continued stabilisation of house price growth.

Indications of continued strength in the underlying fundamentals of the housing market also provide encouragement of a soft landing following the extraordinary price growth of 2009 and 2010.

According to the ABS, Melbourne’s unemployment rate stood at 4.8 per cent in April, nearly 1 percentage point lower than that recorded in April 2010. Nearly 50,000 jobs have been created in Melbourne over that period and Victorian private-sector incomes rose by 4.0 per cent over the year to March – the highest annual rise since 2008.

New home construction, however, continues to decline. Only 2768 private-sector new homes were approved for construction in April, the lowest monthly total in nearly two years.

A lack of supply, together with continued significant increases in population, particularly as immigration levels rise to address emerging skilled labour shortages, will increase competition for housing.

Official interest rates are expected to remain on hold in the short term as key measures of economic growth and inflation continue to remain within the Reserve Bank’s neutral policy band.

Mortgage interest rates and borrowing costs for new borrowers are under downward pressure as competition among banks intensifies as a consequence of dwindling credit growth.

With low unemployment, rising incomes, declining new home building, and the pressure off interest rate rises in the short term, the fundamentals are signalling increased home buying activity in Melbourne through 2011.

Dr Andrew Wilson is senior economist for Australian Property Monitors,

Source: Domain


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