By Larry Schlesinger
Melbourne house prices increased 1.1% over the December 2011 quarter to a median of $538,000, the best result for all capital cities and the first quarterly rise since December 2010, according to Australian Property Monitors.
The December quarter result helped lift Melbourne to the position of second best-performing housing market in 2011 (behind Sydney) and the best-performing unit market.
Andrew Wilson, senior economist at APM, says the Melbourne improvement is being driven by increased buyer activity at the top end of the market while Sydney buying activity is coming from those at the bottom end.
Wilson says this result is significant “as it shows an end to a recent trend of falling prices over the past year, with the realistic potential for a sustained turnaround in some markets”.
“Looking forward, 2012 will provide mixed outcomes for housing markets, with some capital cities set to revive while others will remain flat.”
However, Monique Sasson Wakelin, managing director of Wakelin Property Advisory, disagrees that prestige buyers are pushing up Melbourne house prices.
“I disagree that it is being driven by the top-end prices. My view is the increase has been driven by upgraders with equity. It’s that group which have tended to anticipate the decline in interest rates,” she told the Australian Financial Review.
She maintains a cautious outlook, forecasting growth of 1% to 3% over 2012.
Recent December quarter figures put out by the Real Estate Institute of Victoria show a 36% increase house prices in affluent Kew and 14% gain in Prahran, but also strong gains in less affluent suburbs West Footscray (up 6.2%).
The outlook appears less rosy for Melbourne’s property investor market, with the latest rental vacancy figures from SQM Research showing the Melbourne vacancy rate rising to 4.4% in December with more than 16,000 properties now available for rent – up from 3.4% and 12,300 vacant rental properties in November 2011.
Melbourne’s vacancy rate is more than twice that of Sydney (2%) and significantly higher than the national vacancy rate of 2.5%.
The figures also coincide with data released today by ING showing that Victorian mortgage confidence plummeted during the December 2011 quarter.
Overall, house prices were unchanged over the December quarter according to APM, while unit prices declined marginally, down by 0.5%.
Hobart (0.5%) and Adelaide (0.5%) were the two other capital city markets to record price gains over the quarter, while Sydney house prices were unchanged at $637,000.
The worst-performing housing markets over the past three months were Brisbane and Perth, both recording a decline of 1.2%.
Nationally house prices were down 3.5% over the year led by Brisbane (down 7.5%), Darwin (7%) and Perth (5.2%). The best-performing housing market for the year was Sydney, with prices down a marginal 1.3%, followed by Melbourne, where house prices were down 3.1% in 2011.
Canberra was the strongest-performing market for units in the December 2011 quarter with a 2.9% increase in prices to a median of $414,000, followed by Perth (up 2.1%) and Darwin (1.1%)
Melbourne unit prices in Melbourne fell by 0.9% during the December 2011 quarter to just under $400,000 while Sydney unit prices softened by 1.1% to just under $450,000.
Nationally, units outperformed houses during 2011, with prices falling just 1.6%.
Melbourne unit prices were virtually unchanged over 2011, down just 0.2% for the calendar year.
By far the worst-performing unit market was Hobart, with prices down nearly 16% for the year.
Of the big-city markets, Brisbane registered a 5.8% drop for the year, but a slight recovery in the December quarter with a 0.4% gain.
This article first appeared on PropertyObserver.com.au. Find out what lies ahead in the 2012 property market, download your free Property Forecasts 2012 eBook now.
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