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House Prices In Melbourne Hit Record High

By Rachel Wallace
House prices have accelerated again in all capital cities, with six hitting record highs for the third quarter running and another two again at their highest point in several years.

Melbourne and Canberra have joined Sydney as Australia’s million-dollar cities, with the harbour city surging past $1.4 million.

The rate of growth – in Canberra, it’s 30 per cent in just a year – is so strong that Australia now has a new most-affordable capital for houses: Perth.

Adelaide, Hobart and Brisbane, too, join Canberra, Melbourne and Sydney among the record-holders: the South Australian capital’s growth over the June quarter was the strongest since late 2007, and in Greater Brisbane, the 13 per cent annual growth is the strongest in 13 years.

The Tasmanian capital has continued a staggering growth trajectory to a median of $646,301, up 6.6 per cent in three months and 28.4 per cent in a year.

The results from Domain’s latest quarterly House Price Report, released on Thursday, again highlighted the perfect storm for rising house prices: low interest rates, low numbers of houses for sale against strong demand for property and government stimuli. It will further aggravate prospective first-home buyers, whose time to save will undoubtedly increase, as well as those looking to upgrade, but may well encourage more prospective sellers to list.

Capital city median house prices, June quarter

Source: Domain

The rate of price growth, said Domain chief of research and economics Nicola Powell, was unsustainable.

“This is a very unusual rate of growth. Unusual circumstances create extraordinary outcomes,” she said. “The unusual circumstances over the past 12 months is the focus that’s been placed on our homes: we are spending more time in our homes than ever before and spending less [money]. We are using our homes differently.

“Using increased savings to pay debt can give people more buying power, and for anyone with an increased rate of savings, it’s just collecting dust, so we are seeing people pay down debt or upgrade their homes.”

Dr Powell said surging house prices meant we were seeing the disruption of the “Great Australian Dream” of a quarter acre block as a first home. “That is unattainable,” she said. Many instead would have to look at units – perhaps out of necessity rather than choice.

Unit prices have increased in Melbourne to a record high and also rose in Canberra and Sydney, where median unit prices are higher than the median house price in Brisbane, Adelaide, Perth, Hobart and Darwin, despite their recent rapid gains.

Capital city median unit prices, June quarter
Source: Domain. Darwin and Hobart excluded due to statistical unreliability in June quarter.

Unit prices over the quarter softened in Perth and Brisbane, albeit marginally. Dr Powell expected Brisbane prices to increase after years of declines following well-documented apartment oversupply because of the Olympic announcement.

“We are now seeing a golden moment when Brisbane will host the Olympics in 2032, but for housing, it will not be the Olympic period that will have the impact; it will be the years leading up to it,” she said. “Big spending from government and investment in the city will have a flow-on impact on jobs and economic growth and will be another drawcard for interstate movers, particularly in construction.”

She said the stimulus and activity would put pressure on renting and buying, but the outlook was positive for prices; similarly, Sydney had a price increase from 1993, though it in part was post-recession recovery.

Dr Powell said the price gap between the median-priced house and the median-priced unit in each capital city had never been larger; therefore, some buyers would be able to perceive value in apartments or units.

“There are opportunities but [this report] is a bolt of realism about what you can purchase in your capital city,” she said.

“It’s a wake-up call for first-home buyers for understanding that our median house prices have increased so dramatically. They’re stuck in a corner. Some governments have tried to address affordability through grants and incentives … and they have been helping first-home buyers get to market quicker because the quicker you can, the quicker you can capture value in your asset. We need to re-look at the Australian dream and be realistic about it.”

Dr Powell said with three capital cities at median prices of above $1 million – “a milestone and a psychological hurdle for buyers” – governments at all levels needed to evaluate the diversity of housing being built. She said more townhouses, as a medium between apartments and houses, were needed to help address affordability.

“It is about the missing middle, reduction of red tape and building homes that are affordable and people want to live in,” she said.

“Sometimes, affordability is focused on houses, but units have underperformed comparatively, and we have the biggest price gap on record. There’s an opportunity to seize.

“Investor activity is back, but the activity is nowhere near what it was during the last boom. Units do offer value and affordability. We are seeing unit growth accelerate in Sydney, whether through perceived value or the fact some buyers are having to shift to a unit because they cannot buy a house, regardless of whether they are a first-home buyer or not.”


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