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Dear Fellow Property Investor,
Melbourne’s median auction price has risen by $100,000 in the space of a year, as an influx of buyers vying for limited stock has driven up competition and prices for houses being sold under the hammer.
As of February 21, the three-month average median for houses sold at auction was $1,010,333 compared with $909,100 over this period last year, while the median auction price for units reached $662,500, up from $656,833, Domain figures show.
In November last year, just weeks after Melbourne emerged from a 112-day lockdown that also prohibited physical auctions and in-person house inspections, the three-month average median auction price for houses hit just over $1 million.
It has stayed above $1 million every month since.
The new data comes as Melbourne prepares for another Super Saturday — the second this month, with 1174 auctions scheduled this weekend.
Melbourne posted its first Super Saturday of the year last weekend, with 1004 scheduled auctions, after some auctions planned for the previous weekend, during the snap lockdown, were postponed by a week.
Domain senior research analyst Nicola Powell said to have median auction prices consistently sitting at over $1 million since the end of last year showed the strength of the housing market in Melbourne.
She said historically low interest rates and record levels of savings were aiding buyers back into the market, at the same time households were looking to upsize or relocate in the wake of Melbourne’s long-running lockdowns.
“For buyers, covid has been a big driver of change and for some it’s spurred on decisions about where they want to live and that has been reflected in the record high levels of finance approvals we saw at end of 2020,” Dr Powell said.
“What we are seeing in the Melbourne market now is still some of that pent-up demand from last year’s lockdown, and those buyers that couldn’t secure something last year are being quick to jump back into the market this year,” she said.
She also believes upsizers, or households seeking more space since lockdown, are fuelling a large proportion of the increased buyer demand.
“I really think the upsizer market is particularly strong and that Melbourne has very much seen an owner occupier-led rebound in housing,” she said.
“And, with such high levels of finance you can expect to see the level of demand for houses to continue to be quite strong.”
Ray White Victoria and Tasmania chief executive Stephen Dullens said he was not surprised auction medians had reached upwards of $1 million, given demand from home buyers continued to outweigh supply.
“There’s no question buyers are out in force at the moment,” he said. “Some of that is a consequence of that pent-up demand from last year’s lockdowns, but we’re also seeing an influx of buyers who 18 months ago probably had no plans of moving.
“What we’re seeing is people who were living say 10 kilometres from the CBD and planned to be there for 10 years or more are all of a sudden thinking, ‘well, we can move a bit further out and get an extra bedroom and a bit more space,” he said.
“Since covid, the world is very different and it’s brought a lot more people into the market who 18 months ago hadn’t planned to be in the market at all.”
He said the increased buyer demand was putting upward pressure on prices while supply struggled to keep up.
“In terms of new listings, we actually have a lot more than this time last year but the total amount of listings is still well down.
We’re also seeing days on market dropping and dropping. When you have such strong buyer demand when a quality property comes on to the market they are jumping on it really quickly,” he said.
Peter Kakos, The Agency’s general manager Victoria, said low interest rates, pent up-buyer demand from the city’s long-running lockdowns and lifestyle changes brought about by covid had “created the perfect storm” for a Melbourne’s property market.
“You also have the fact that people can’t travel at the moment and so they’re putting that money into property because they see it as a very safe investment,” he said.
He also believes a growing upsizer market is driving increased competition, which is leading to some highly competitive auctions and pushing up prices.
“People have realised over the past 12 months that the home is a haven and so we’re seeing people looking to upgrade because that home environment has become increasingly important since living through some pretty lengthy lockdowns,” he said.
“Ultimately, we have a significant shortage of stock. Stock is really, really tight and there is a lot of depth in the marketplace. Then you have low interest rates, which makes money incredibly cheap and it’s created this perfect storm.”