Melbourne property market myths v the hard facts

According to the RP Data Rismark June home value results released today, Melbourne dwelling values rose by 1.8% over June but are still lower over the quarter with a 2.4% fall. 

This further highlights some very short term variability against a stable background with a 2.9% rise over the first half of the year.

Melbourne is showing all the signs of a stable but shallow growth phase with a 14.2% rise over this cycle.

The market is well-placed for spring, well ahead of any of the previous three years.

The data shows that this is less of a roller coaster ride than the last two cycles in 2007 and 2010 and is therefore likely to be more sustainable.

House values rose by 1.7% in the month and by 3.3% this year compared to a rise of 2.7% for units which have shown zero growth this year.

The median sale price from settled sales in the quarter was $630,000 for houses and $468,000 for units.

Quite often, myths or commonly accepted facts about the property market can turn out to be incorrect when a review of the actual numbers is conducted.

Do people really buy and sell every seven years?

It’s often said that most home owners buy and sell every seven years, however, research shows that in Melbourne the average hold period for houses is 11.4 years and for units 9.5 years.

While the hold period differs from suburb to suburb, there are a number that match the commonly accepted seven years.

In Melbourne these include Pakenham, Narre Warren South, Burnley and St Kilda West. 

Some of the shortest hold periods for property ownership are in the city’s newest suburbs such as Lyndhurst, Doreen and Truganina where the average hold period for a house is around four years.

At the other end of the spectrum is Vermont South with a hold period of 18.2 years.

Is it true that houses double in value every decade?

The answer to this question highlights that sometimes timing is everything in real estate.

The RP Data Home Value index for houses in Melbourne shows values doubled in just over seven years between February 2003 and October 2010 however, the same scenario occurred over 11 years between February 2003 and May this year. 

Do rents always rise?

It seems that rents are often always rising when in fact they may not be. The reality is that it all depends on balance of demand and supply in the relevant suburb.

For instance, over the past five years advertised rents for houses in Toorak, Doreen and Mernda have decreased. While in Clayton, Oakleigh and Eltham they have risen by no more than 1% per annum.

There are many more that have risen over this time including the popular suburb of Northcote where rents have risen by 28% over five years.

Houses sell for more than the advertised cost – but do they?

A popular topic over dinner tables and in the press is the relationship between advertised prices for houses at auction and the sale price. The main view is that the sale price always exceeds the advertised price.Less often discussed is the fact that most homes sell for less than their advertised price.

Around 70% of homes sell by private sale and are usually sold for around 6% below the initial advertised price. 

However, this does vary across the city with the discount being 8% in Springvale, and 4% in Yarraville.