Melbourne house and unit values fall for two consecutive months: RP Data's Melbourne weekend auction preview

The key differences between the past two property cycles and the current one has become much clearer following Monday’s release of the RP Data-Rismark Home Value Indices results for May.

The May results showed that the value of a house dropped by 3.6% in May resulting in a rise of only 1.6% over 2014. Unit values also fell by 2.6% over the year following; a drop of 3.4% in the month.

After a new nominal peak in Melbourne house values was reached in March, there has been two consecutive months in which values have fallen ensuring buyers in winter and early spring won’t face rapid price rises. In fact, they are likely to see houses valued lower than they were in real terms in 2010. This result should also eliminate any concerns that the local market was locked into a cycle of unstainable growth in prices.

This upswing phase in house values started in May two years ago and is clearly more moderate than the 2007 and 2010 cycles due to better alignment between supply and population growth along with the fact that consumers remain cautious. Over the past two years, house values in Melbourne have risen by 13.1%  and are now only 0.7% higher than the October 2010 peak.

There are 303 auctions scheduled this week in Melbourne compared to 197 for the same time last year. Volumes are temporarily low due to the long weekend.

So far this year there have been 16,357 auctions and a clearance rate of 67.5% compared to 68.6% from 12,341 auctions this time last year.

The high volume of residential listings this year is having a positive impact for buyers. Home values have fallen for the second month in a row and auction clearance rates have remained in the 60’s.

The RP Data-Rismark May Home Value Index released this week showed that the value of a house dropped by 3.6% in the month resulting in a rise of only 1.6% over 2014. Unit values fell by 2.6% over the year following a drop of 3.4% in the month. It’s unlikely that buyers over winter and into spring will see their purchasing power diminished.

We also saw a small fall in the average time on market for houses sold at private sale from 41 to 39 days. This was coupled with a rise in vendor discounting to – 5.5% from -5.4% over the previous week.

Key data

• Clearance rate week ending 1 June: 65.4%
• Melbourne auctions expected week ending 8 June: 303
• Melbourne private sales time on market week ending 1 June: 39 days (houses)
• Melbourne vendor discounting market week ending 1 June: -5.5% (houses)
• Listings being prepared for market are 1.1% higher in month ending 1 June (seasonally adjusted)