On the Up: Prices Rise to Challenge

22 Apr 2013 - Chris Tohurst from http://news.domain.com.au/

Melbourne's March quarter puts in a healthy performance.

 

Low interest rates are continuing to boost Melbourne's real estate market. Saturday's auction clearance rate was a healthy 71 per cent from the 471 auctions reported to the Real Estate Institute of Victoria.

The result is right on trend for the year so far. It comes on the back of the release of REIV price data showing that the median house price in Melbourne rose in seasonally adjusted terms from $534,000 in the last quarter of 2012 to $561,500 in the first three months of this year.

REIV spokesman Robert Larocca said the 5.1 per cent increase in prices in the March quarter was the housing market's best performance in a March quarter since 2001.

January to March is usually a weak period because of a post-Christmas lull in sales activity. Falling mortgage lending rates and higher clearance rates helped to turn the tables this year, although demand for units was subdued.

Units experienced a 1.4 per cent seasonally adjusted increase to a median of $456,000, a lacklustre result that reflects the surge in inner-city apartment stock.

Mr Larocca said 2013 would be a year of moderate growth. ''You are not going to see four quarters of 5 per cent growth,'' he said.

Improvements in prices were particularly pronounced in the inner and middle ring suburbs, with Balwyn, Brighton, Northcote and Camberwell all recording strong growth.

Buyers have responded to the Reserve Bank taking an axe to the cash rate. Since November 2011, the RBA has cut the cash rate by 175 basis points. It now sits at 3 per cent.

But low lending rates appear to be helping those who need it least. JPMorgan's Australian Mortgage Industry Report, released on Wednesday, shows downsizers swapping a large family home for a smaller dwelling are the best placed to take advantage of the cheaper housing finance.

''Downtraders are exceeding their minimum repayments and are significantly ahead of their contractual obligations,'' the report said.

It said buyers in the first-home and ''trading-up'' segments were the most stretched.

High house prices were also limiting any relief that low interest rates could bring to entry and mid-level buyers.

Monique Sasson Wakelin, of Wakelin Property Advisory, said auction clearance rates were up from the mid-50 per cent range in 2012 to the mid-to-high 60s and low 70s so far this year.

''This is evidence of a return to a balanced market, and maybe even a seller's market,'' she said.

''A recouping of 5.1 per cent in prices in the March quarter indicates that the environment is shifting. I think it is a clear indication of a better level of confidence.''

Mr Larocca said buyers remained cautious and there were opportunities for astute buying.

''It's the sort of market that is rising, but not at a rate of knots, and you can get some lumpy growth around the city,'' he said. ''Astute investors can do quite well - it is a matter of picking the area.''

Fletchers chief Tim Fletcher and Hocking Stuart director Andrew James reported widespread multiple bidding at auctions on Saturday.

Fletchers had an 83 per cent clearance rate. Hocking Stuart sold 39 from 51 auctioned properties, with solid demand for properties below $600,000.

''Younger buyers are back in the market,'' Mr James said.

There are 620 auctions scheduled next weekend.