Melbourne House Prices Recover

02 October 2012

September boost in Melbourne housing market

Simon Johanson
Published: October 2, 2012 - The Age Newspaper

Melbourne's home values have bounced back over the past three months as lower interest rates spur Spring buyers, new figures show.

While property values across Australia grew 2 per cent in the September quarter, Melbourne's surged by 3 per cent.  The jump in values will provide relief to vendors and other industry players who have struggled with falling or stagnant prices for the past two years since the market peaked in 2010.

Homes in Melbourne fell in value by 10.5 per cent between October 2010 and May 2012 after rising by 36.7 per cent between the start of 2009 and the market's peak.
Since the May trough, Melbourne has seen values increase more than all other capital cities.

"The strong performance of the housing market since the beginning of June has reversed the value falls recorded earlier in the year, putting dwelling values 0.8 per cent higher over the first nine months of the year," according to property analysts RP Data.

Analyst Tim Lawless attributed the rebound in values in September to low interest rates being charged by banks on mortgages.

"It’s no coincidence that housing market conditions bottomed out at the end of May, after the Reserve Bank cut the official cash rate by 50 basis points," he said. 

"A further cut of 25 basis points in June and the anticipation of further rate cuts in the pipeline appear to have instilled renewed confidence in the housing market."

Over the three months to September, capital city dwelling values across Australia rose 2.0 per cent, with rises in all cities apart from Hobart and Perth, RP Data said.

Perth’s values fell 0.2 per cent over the three months, a virtually flat result, while Hobart’s dropped 1.8 per cent.  Darwin’s home prices rose the most, up 3.9 per cent.  Sydney recorded a rise of 2.8 over the quarter and Melbourne, which has been hit hardest by falling values, recorded a jump of 3 per cent, according to RP Data.  A turnaround in conditions may spur more home hunters to enter the market, with many potential buyers holding off as prices softened over the past two years.

Sellers may also be more confident about putting their home on the market.  But several reports released last week suggest Australia’s residential property market is still vulnerable to global economic conditions and wary, downbeat consumers.

Buyer interest remains soft, sales activity is at historically low levels and the stock of unsold homes at near record highs, the ANZ’s Australian Property Outlook said.
High profile business failures, insolvencies and job cuts have heightened concerns over job security in many areas, prompting households to focus on paying off debt, it suggests.

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