Hello and welcome to another Nyko Property market update. Lots to go through this month with record low interest rates and the biggest increase in property prices seen since 2010.
Melbourne led the country in the June quarter for growth in property prices with a quarter on quarter increase of 5%. Sydney and Perth also performed well with 2.7% and 3.2% rises respectively. Housing prices were up 2.8% nationally over the quarter, the third consecutive rise and a level of growth not seen since March 2010.
The market still has some challenges in Melbourne though, with an oversupply of new homes in the outskirts of Melbourne and a rash of new apartments in the city center, which are likely to work against sharp price rises in those markets. The opportunities lay in the middle ring suburbs (5-20km from the CBD) priced close to the Melbourne median price of $553,447.
With the rest of the economy seemingly slowing, the Melbourne property market shows strong indicators that it is set for further growth in the coming 12 months.
One of the main contributing factors is Melbourne population growth, leading the country again by adding over 77,242 people in 2011-12 reaching a population in mid-2012 of 4.25 million. It was the 11th year in a row the Bureau of Statistics estimates that Melbourne led the nation’s growth. BIS Shrapnel senior economist Jason Anderson said “This will mean that Melbourne, with its long-term population growth of 1.3 per cent a year, will displace Sydney as Australia’s largest city by 2037.”
Many commentators sense that confidence will come back even stronger after the election with First Home Buyers, who are currently staying out of the market (led by investors), able to borrow money at 5% interest – a much bigger incentive than any grant. 1 year fixed rates have been found as low as 3.99% at the time of writing.
Interest rates are the other big factor affecting the property market, having fallen to a record low cash rate of 2.5% and the big banks followed with their cuts uncharacteristically quickly. Just 3 minutes after the Reserve Bank announcement NAB reduced its interest rates by the full 0.25% while Westpac followed shortly thereafter with a reduction of 0.28%. The reserve bank has now reduced the cash rate by 2.25% since November 2011, making affordability the best it’s been in many years.
Dealing with investors day in and day out, our office has a good feel of what is happening in the Melbourne property market. What we have seen since August/September last year is a steady rise in confidence and inquiry by investors, who are traditionally the first to re-enter the market after a reduction. This now seems to be filtering through to the rest of the market with clearance rates in Melbourne over 70% consistently this year, peaking at 82% last Saturday.
If you would like to be regularly updated on the property market and other important issues affecting the Melbourne property market click the follow by email button to the right.
Bill Nikolouzakis – Nyko Property