Melbourne median nudges $800,000. How high can it go?
Our first 2017 publication covers results from Monday the 19th December 2016 to Sunday the 5th of February 2017. 421 auctions were reported to the Real Estate Institute of Victoria (REIV) with 333 sales recorded, 88 properties were passed in, 39 on a vendor bid. The clearance rate averaged 79%, compared with December’s 78%, and up on last year’s Dec/Jan average of 74%.
Well how about that! The experts said double digit house value growth in Melbourne would not happen in 2016 but with the December Quarter figures in, showing a 3.6% rise, the annual price growth was 10.3%. This follows on 2015’s big 14.5%. Values are predicted to rise 4 or 5% in 2017 (Domain Group). But with little change in the current environment expected across 2017 that figure looks a bit conservative. Strong migration to Melbourne is underpinning the market with 100,000 new arrivals each year. Plus of course, record low interest rates make borrowing easy.
So looking ahead, how high is the Melbourne affordability ceiling? And are Melbourne prices starting to outpace average incomes? Looking interstate sheds light on this. The Sydney house price median is currently $1,021,968 and rising. Melbourne’s median is $795,000. (There are several reasons for the disparity including Sydney’s demand for expensive water views fuelling higher prices at the top end).
The average annual income in Sydney is $80,132 (Australian Bureau of Statistics 2016), with Melbourne incomes 5% lower. But home prices in Melbourne are 20% lower. First time buyers aside, this shows average Melbourne home buyers have plenty of spending power in reserve and the Melbourne median could go much higher before affordability tops out.
The overall driver here being the Australian commitment to home ownership and building wealth through the primary residence.
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