Current Market Trends
The Melbourne median house price for the March quarter was $565,000, according to the latest results from the Real Estate Institute of Victoria. This represents a six per cent less than the revised December quarter median of $601,000.
Looking across the city, median house prices in the inner city increased by 0.2 per cent to $882,500 and they reduced over the year by 5.6 per cent. In many respects the middle and outer suburbs have been more stable in the medium term. The median house price in the middle suburbs dropped by 1.6 per cent over the quarter to $630,000 but increased over the year. Outer-suburb median house prices showed a 2.1 per cent drop while also increasing over the year – by 7.4 per cent to $451,125.
The main reason the median house price dropped was interest rates with seven rate rises since December 2009. Of those seven increases the November rate increase had the most significant impact on the market.
It must also be noted that most years the median price does reduce in the March quarter due to the lower activity in January.
These results show that prices in most suburbs in Melbourne have plateaued and this will be welcome news for those looking to buy this year.
Melbourne remains the second-least-affordable city in which to buy a home and buyers are being more cautious, as highlighted by the overall number of sales falling by 18 per cent compared to this quarter last year. There are also about 37 per cent fewer first home buyers active in the market than this time last year.
For the medium term the residential market has entered into a period of lower transaction numbers and lower price growth, and we are not going to see a repeat of the 20 per cent increase witnessed in 2010. The key to how the market performs in 2011 and beyond will depend on the strength of the local economy; at this stage, the fundamentals are still strong, especially population growth, employment and consumer confidence.
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