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.
Buyer’s agent Cate Bakos has seen a fear of missing out among auction bidders, especially upgraders or expectant parents, sometimes with help in hand from the Bank of Mum and Dad.
“[I’m] seeing prices that are eclipsing where I would have thought was not possible,” the Real Estate Buyer’s Agents Association president said.
“I’ve seen parental support even with upgraders … parents are gifting them $50,000 or $100,000, and that’s on top of their budget.”
The price rises are broad-based across the city, with several individual regions posting double-digit gains.
With few houses for sale in the area, auctions have been quite competitive, and the family narrowly missed out on winning a few.
Since prices have soared, they have changed tack to opt for the certainty of selling before they buy and will shortly list their home for sale.
“The house market around here has exploded, and houses are going for much more than we even thought they would, so we’re not sure on how much more we’re going to have to spend,” she said.
“We might get more for our home now, but also, we’re going to have to pay more to go to the next suburb, so that’s a little bit scary for us.”
Their agent, Ray White Cheltenham’s Kevin Chokshi, said many family homes in his area were selling for more than $1.5 million, while $1 million properties tend to be land value only.
“We haven’t sold a single family home on a parcel of land under $1 million in months now,” he said.
ANZ senior economist Felicity Emmett, who in March forecast a 16 per cent jump in Melbourne housing prices over 2021 that could lock out some aspiring first-home buyers, said property prices were surging, especially with investors coming back into the market.
“We’ve been forecasting very strong increases in prices this year, but it still does actually surprise me given that there has been so much uncertainty about the outlook, and we did have a period there where unemployment was very high,” she said.
“Clearly, the impact of these very low interest rates and the prospect of them staying low for some years is outweighing all the uncertainty.”
She expects the strength to continue, albeit not at the same pace as fixed interest rates edge up, more home owners list their properties for sale, and the bank regulator looked likely to step in with limits on home borrowing.
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.”
Jellis Craig managing director Steven Abbott said April, May and June had been “very busy, almost hectic”, with high demand for family homes.
Built-up demand from previous lockdowns and a fear of missing out meant the market was buoyant before the latest stay-at-home rules, he said.
“Coming out of that, we can’t see any reason why that would change,” he said.
“We think it’ll be a healthy, buoyant, equally dynamic August-September.”
This article first appeared on domain.com.au
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