October 31, 2019 | Melbourne house price rises
Melbourne’s property market is currently experiencing the quickest price recovery on record, which is disheartening for many buyers who hoped that prices would stay level after the recent correction in 2018 and the first half of 2019.
This week, the REIV released data for the September Quarter stating that Melbourne’s median house price jumped 4.5% in just three months to $830,000. The property shortage is really starting to push prices up and forced the largest growth in Melbourne home values in two years.
There has also been a strong resilience across the metropolitan units and apartments sector with prices increasing by 3.9%, despite higher supply levels. This most likely comes down to affordability constraints in the market as well as more first home buyers supporting demand, thanks to first home owners stamp duty incentives.
The top end homes of Melbourne previously recorded the largest decline over the past twelve months, but now these suburbs are leading the charge for the most rapid recovery.
What’s driving the house price increase?
The strong rebound is attributed to a variety of factors including:
- The Liberal party winning the Federal Election.
- Three interest rate cuts and record low mortgage rates.
- APRA loosening credit rules.
- Higher levels of investor participation.
- Strong population growth.
- Weak Australian Dollar which is incentivising foreign buyers again.
Another major driver of this sudden price surge is the shortage of real estate stock which is approximately 40% lower than this time last year. Home buyers have suddenly changed their strategy when either up-sizing or down-sizing their homes.
The switch from a “Seller-Buyer” market
During 2018 and the first half of 2019, people were not confident they would achieve their desired price when selling their home and they felt more comfortable selling first as they wold know exactly what they had in the bank before they bought again. This forced the market to experience many ‘seller-buyers’ and contributed to very healthy stock levels. It made sense to people – in a declining market, sell at today’s price and buy at tomorrow’s price.
The switch to a “Buyer-Seller” market
Now that the market has turned and confidence is sky high again, people are very confident they will achieve their desired sale price for their home. However, they are now concerned they won’t be able to secure their new home or get priced out of the market. This has led to the ‘buyer-seller’ strategy which is putting more pressure on property stock levels. People aren’t listing their homes for sale until they buy first, which again makes sense in a rising market – buy at today’s price, sell at tomorrow’s price.
With positive media, easier lending circumstances, high auction clearance rates, price growth and restored buyer confidence, some property commentators are forecasting double digit capital growth for the year ahead.
The fear of missing out and then paying more is now the current theme in the marketplace. This sentiment was also experienced during the property boom from 2013 to 2017 when prices were soaring.
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