Dear Fellow Property Investor,
Despite predictions that COVID-19 would lead to a property market collapse, house prices in Melbourne hit another record high level of $1,022,927, a new Domain HousePrice Report Shows.
Melbourne’s median house price has soared past $1 million, defying the pandemic to set a record and raise fresh fears over housing affordability.
Ultra-low interest rates have prompted a rush of home buyers, sending house prices up 16.2 per cent to a median of $1,022,927 over the past year, the latest Domain House Price Report for the June quarter, released on Thursday, shows.
Prices rose by about $445 per day in the three months to June, or 4.1 per cent, despite a snap lockdown in the quarter.
Even units are at a record high median price of $572,793, which is 5.2 per cent higher than a year ago, although the apartment market is patchy with weakness in the CBD.
Months of lockdown have revealed the flaws in existing living arrangements, with a wave of Melburnians keen to upsize into more spacious abodes with a home office. Armed with cheap mortgage rates, savings from cancelled international travel or entertainment, government stimulus, and parental gifts, buyers are competing hard for the few homes for sale.
The result is the strongest annual price rise in 11 years, Domain chief of research and economics Nicola Powell said.
“We’ve placed a greater emphasis on our homes because we’re spending more time in them,” Dr Powell said. “It’s spurred on purchases, or it’s brought forward decisions.”
Prices were set to keep rising, although not at the same “frantic” pace as affordability bites and more supply came onto the market when sellers were enticed by record prices, she said.
“The seven-figure median is really such a psychological hurdle [for buyers] … It really is disheartening for first-home buyers when you’re staring down the barrel of a million-dollar median,” she said.
The price rises are broad-based across the city, with several individual regions posting double-digit gains.
Sea-changers sent Mornington Peninsula house prices up 21.8 per cent in a year to a median of $895,000, while other big movers were the outer eastern suburbs (up 17.2 per cent to $860,000) and the inner south (up 16.5 per cent to $1.49 million).
The inner suburbs and north-east each rose by at least 10 per cent.
Reserve Bank of Australia research in 2019 found a permanent one percentage point cut in the
cash rate would result in 30 per cent house price growth after three years.
That report’s author, now chief economist for the Centre for Independent Studies Peter Tulip, said with lower rates than ever, house prices would keep rising for a while, although it was harder to predict a few years from now.
“There is going to be a lot of momentum in house prices,” he said.
“The fact that house prices have risen strongly in the second quarter of 2021 means that they are very likely to grow very quickly in the rest of 2021.”