Melbourne housing market expected to improve in 2012, particularly in villages: WBP’s Greville Pabst
Apprehension from property buyers and sellers led to a notable reduction in stock and transaction volumes across Melbourne in 2011, triggering a decline in values by a reported 6%, according to the Australian Bureau of Statistics.
According to reports, fewer than 69,000 homes were sold in Melbourne, representing the lowest number of property sales in a decade and a drop of 37% from a peak of 109,000 transactions in 2007. This figure is well below the decade average of more than 90,000 transactions per annum.
Despite this, a more favourable performance is expected for the market in 2012, following improved affordability, subdued credit growth and a higher propensity of both groups to save.
In what is an encouraging sign for the market, Melbourne property showed marginal increases in median house and unit prices in the fourth quarter of 2011 to $550,000 and $455,000 respectively, after interest rate cuts in November and December.
The Reserve Bank's decision to leave cash rates unchanged in February affirms the strength of the local economy and will allow for a more moderate start to the property season.
Even with the anticipated improvement to sentiment, market performance will remain subject to sector-specific pressures in 2012. WBP Property Group’s property advisors have grouped each property type and forecasted its performance for the year ahead.
The luxury and mortgage-belt property segments were among the poorest performers in 2011, thanks to credit confidence and unemployment pressures. Although overall conditions have improved, these markets are susceptible to further decline. Properties prices of $2 million and above in areas of Stonnington and Boroondara, including Brighton and Black Rock, are predicted to fall up to 10%.
Mortgage-belt areas, such as Pakenham, Cranbourne, Melton and Clifton Springs, are set for price falls of up to 7%.
However, the news is optimistic for other areas of the established house market, which is tipped for positive growth in 2012. In particular, established houses priced at less than $2 million in well-regarded inner-suburbs such as Hawthorn, Kew, Richmond, Prahran and, slightly further afield, suburbs such as Ashburton, Camberwell, Hampton and Mentone, are expected to demonstrate growth of up to 3 to 4%.
Similarly established units and apartments situated in smaller developments in inner-city lifestyle locations will record a positive increase in growth in 2012. Areas include Armadale, Elwood and Hawthorn, where competition remains fierce for quality properties situated near Melbourne's “villages” and within a short commute of the CBD.
Conversely, modern units and established apartments in the CBD and Docklands are predicted to decline of up to 5%, with oversupply issues, lenders' pre-sale requirements and credit restrictions impacting saleability.
With discretionary spending expected to remain low in 2012, holiday properties are also predicted to continue to suffer with falls starting at five per cent and up to 10% for the leisure market.
In 2012, individual property performance will depend on location, size and aspect, particularly as buyers become increasingly selective. While current conditions remain favourable for buyers, they must be aware that not all properties represent sound investments.
Further afield, house prices in regional Victoria demonstrated overall growth of 0.8%, with a median price of $312,500. Figures for December show that Bendigo increased by 6.3% to $294,000, Ballarat increase by 3.7% to $290,000 and Geelong weakened by 2.3% to $380,000. However, be careful to do your research as much of the growth in these areas is artificial and driven by sales in new housing estates.
Tomorrow we will report on four Melbourne regions in the spotlight.
Greville Pabst is CEO of the WBP Property Group.
Photograph of Elwood village by iPostcodes.com.au courtesy of Flickr.