Melbourne property values grew another 1 per cent in October as “deteriorating” housing affordability contributes to a slowdown in the pace of growth.
The city’s median dwelling value increased 3 per cent over the quarter and 16.37 per cent over the past year to $780,303, despite Covid-19 and continued lockdowns.
CoreLogic’s latest Hedonic Home Values Index shows houses jumped 1 per cent to a median of $972,659, as units grew at the same rate to reach a $621,898 median last month.
The city’s median house price rose 19.5 per cent over the past 12 months; units, 9.2 per cent.
And while the market remains resilient, with last month’s median dwelling value gain increasing compared to September’s 0.8 per cent rise, signs of “downside risk” were building due to worsening housing affordability, rising listing levels, and less financial stimulus.
CoreLogic’s head of residential research Eliza Owen said the city’s housing affordability was “seriously deteriorating”.
“Melbourne’s typical house value is getting towards that million-dollar mark and rents are generally rising too, which (makes things) hard if you are trying to save for a deposit,” Ms Owens said.
She said Melbourne had experienced “bursts of confidence” across the last year, particularly when transactions ramped up in late September with the resumption of physical house inspections.
But the welcomed peak of listing volumes for the delayed spring selling season wasn’t likely to happen until mid to late November.
“With more supply coming onto the market and some of the other headwinds with tighter lending policies and the rise of fixed mortgage rates, the pace of growth will really continue to slow down,” Ms Owens said.
“What we did see in March 2021 was that when stage three and four restrictions eased in Melbourne there was a surge in migration of people moving to regional areas or interstate and we could see a repeat of that.”
Australian property values rose 1.5 per cent to a $686,339 median in October and although the monthly pace of growth is easing, the annual trend has continued to rise.
“We are going to continue seeing a rise in values, but for every upswing we have observed there is a fall in prices,” Ms Owens added.
“It very much depends on what happens with interest rates.”
Finder’s RBA survey also expected property prices to reach new heights as international travel opens up.
It suggested Melbourne’s house price could rise a whopping 9 per cent before the end of the year, while units were tipped to jump 4 per cent.
Bendigo Bank’s David Robertson said the recent surge in inflations means banks are increasing internet rates more urgently.
“The RBA has sensibly positioned itself at the back of the central bank queue for rate hikes, but the queue is now moving quickly, bringing a late 2022 or early 2023 rate hike back into focus,” Mr Robertson said.