Chris Tolhurst July 14, 2012
Melbourne’s sluggish real estate market is beginning to bite. Figures released today showing the median price of a house in the city has fallen by 5.3 per cent to $535,000 in a year.
The Real Estate Institute of Victoria figures show the median price of a unit fell by 4.1 per cent over the year to June. A typical unit in Melbourne now costs $450,000, down from $469,000, while the median price of a house has dropped $30,050 from $565,050.
“Prices came down last year, predominantly in the first half of last year, and over the first six months of this year there hasn’t been any change at all,” REIV spokesman Robert Larocca said yesterday.
“The market has found its new level, and until we see growth in the volume of sales you will not see an increase in prices.”
While prices have been going sideways or falling for 18 months, they spiked up sharply in 2009 and 2010. The REIV estimates Melbourne house and unit prices grew by 18-20 per cent in this period.
Richard Reed, who lectures in property and real estate at Deakin University, said house prices were a factor of supply and demand interaction and the growth outlook for some suburbs was much better than others.
“Some areas, especially inner-city suburbs, are relatively small suburbs with no available land,” he said. “A small increase in demand for these areas will result in a sharp increase in values.”
Professor Reed said the large size of the Melbourne market and its range of different dwellings meant it wasn’t possible to use one measure of median house prices across the city. “The demand drivers for the western suburbs are different to the demand drivers for the bayside properties in the east,” he said.
Both buyers and sellers are taking a conservative approach in this market. The number of sales is unchanged from a year ago and more vendors are opting to sell through private sales rather than auctions.
Mr Larocca said people were buying and selling because they needed to due to a change in employment or an increase in family size, and not for speculative reasons.
The REIV data shows demand for Balwyn and Malvern East has lifted markedly. Healthy demand was also recorded for Cheltenham, Newport and Pakenham.
Still, Professor Reed said increases in demand in the outer suburbs were unlikely to translate into sustained price growth because these suburbs were geographically much larger than those in the inner-city.
“Over time more people will want to live closer to the city due to traffic congestion and higher petrol prices,” he said.
The institute recorded price increases of 2.9 per cent for houses and 2.3 per cent for units between the March and June quarters of this year. But Mr Larocca said these “minor variations” were cancelled out when data for the full year was revised.
Low levels of consumer confidence were the residential market’s biggest challenge, he said.