The median price of a house in Melbourne increased by nearly nine per cent in the September quarter in seasonally adjusted terms. This quarter’s higher than expected growth shows a very clear increase in demand but warns that this level of growth may not be sustained over the long term.
Melbourne’s house price increased to $595,500 from a revised $547,500 in the June quarter. This means that Melbourne’s median house price is now at a new peak, exceeding the previous peak of $559,000 in December quarter 2010.
Interest rates remain low and buyers are taking advantage of this with the chances of a further rate cut this year becoming less and less likely. But judging from the rather rapid increase in house prices, affordability pressures could start to act as a counter balance to demand in the next few months, particularly for first home buyers.
This quarter’s increase was driven by a very strong increase in demand, particularly in August and September. Sustained growth in previous quarters has also instilled further confidence in the property market in Melbourne. The increased demand is supported by a number of positive indicators in the state including population growth, consumer sentiment, clearance rates, and the number of sales.
Victorian consumers recorded an 11.4 per cent increase in sentiment over the quarter, the highest of any state. The average clearance rate this quarter is 14 percentage points higher than this quarter last year. We also recorded a 10 per cent increase in the number of sales this quarter in comparison to last year.
Suburbs with the strongest growth in median prices this quarter were concentrated in the inner and middle suburbs: Balwyn, Brighton East, Ascot Vale, Balwyn North, and Footscray. This is reflective of the relatively high number of premium sales, particularly million dollar sales, in this quarter.
Units and apartments recorded similar level of demand to houses with a 4.8 per cent increase in seasonally adjusted terms to $481,500.
The median house price in regional Victoria was more stable with a 0.8 per cent increase in seasonally adjusted terms to $308,000. However, the key regional centres of Geelong, Ballarat, and Bendigo continue to outperform the broader regional market.
NOTE: The REIV has adopted the seasonally adjusted median for overall comparisons as it is less affected by the compositional variations that are particularly pronounced in the December and March quarters. Original and trend variations available from www.reiv.com.au