Melbourne’s house prices are rising. For Kate, it’s the best time to sell
Melbourne’s house prices have risen for the first time in a year and a half, shaking off the downturn to edge up 0.4 per cent in the June quarter to a median $1,027,996.
The median unit price lifted a stronger 3.5 per cent to $533,110, Domain’s latest House Price Report, released on Thursday, showed.
Prices have been supported by low supply of properties for sale, a pick-up in migration and an ongoing demand for homes spacious enough to accommodate working remotely, despite the risk of ongoing interest rate hikes.
While experts do not expect property prices to plummet from here, they also think there won’t be a return to boom-era price growth any time soon.
Domain chief of research and economics Dr Nicola Powell said that after more than a year of record-paced price falls as interest rates rose from last May, Melbourne’s house and unit prices have reached their trough. But this recovery will be slower and steadier than those in the past.
Melbourne’s house prices are now 6.1 per cent below their late 2021 peak, while units are 8 per cent lower.
“We may see the wobbles over the next 12 months [with house prices going up and down], but I still stand behind the fact we’re likely to see a slow and steady recovery,” Powell said. “It won’t be a boom time scenario in Melbourne, but it will be a slow burn, a much more moderate pace of growth.”
In the June quarter, median prices rose most in Melbourne’s outer east, up 4.3 per cent, followed by the south-east (up 2.6 per cent) and inner suburbs (up 2.2 per cent).
It comes as inflation eased to 6 per cent in the June quarter, reducing the likelihood the Reserve Bank will need to lift the cash rate much higher.
Westpac senior economist Matthew Hassan said Melbourne’s house prices had risen thanks to a strong resurgence in migration. And sellers nervous of a weak market held off from putting their homes up for sale, meaning more competition over fewer available properties.
But the rise in prices would be short-lived as more owners decide to sell and there was still a risk of more interest rate pain, he said.
“Consumer sentiment for home buyers is still very weak, and though there has been a bit more investor activity, it’s not looking great,” he said. “This rally has really short legs and will be difficult to sustain.
“The big test will be as we see more sellers come into the market. It will test the depth of the demand from buyers, and see if people can continue to stretch to afford a [more expensive] house.”
AMP chief economist Dr Shane Oliver agreed there were significant headwinds ahead and that the full impact of rate increases was yet to hit the market.
“We’re yet to see the fallout of the fixed rate roll off,” Oliver said. “As we go through the next year, unemployment will rise and there will be more distressed selling.”
Oliver said slowing clearance rates and a rise in listings before spring were also pointing to a slow recovery, and he expected prices to soften before another sustained upswing.
Despite the headwinds, home sellers like Kate Brabant and her husband Mason Nutt are hopeful buyers will stick around, after listing their Albion home for auction this week.
The couple, both in their early 40s, are planning to live in Cambodia for a year, before their two children start school.
The couple is nervous about selling their home, but have had advice that now is the right time.Credit: Eddie Jim
“We have been watching what house prices have been doing in our local area,” Brabant said. “Especially since we’ve been hearing so many scary stories.
“This is the first time we’ve sold a house, so we’re a little nervous. But everyone we’ve spoken to, like tradespeople that have come into our house and agents, has told us now is a fantastic time to sell.
“Because there’s not a lot listed for sale at the moment, so now’s a good time to go because there isn’t a lot of competition from other sellers,” she said.
Brabant and Nutt’s selling agent, Ray White Sunshine’s Marcus Fregonese, said the local market for renovated family homes was strong, despite the interest rate rises.
However, more investors are looking to sell as their mortgage costs jump, Victoria’s land taxes increase and the state government floats limits on rent hikes.
“Good quality stock, family home stock is much harder to come by, but investors are looking to leave the market across the board,” Fregonese said.
“Homes that need work or are in poor locations are struggling because buyers aren’t willing to buy something needing work – unless they can get a bargain.”
clarification
Dr Shane Oliver’s title has been updated. He is chief economist at AMP.