After several years of subdued activity the Melbourne property market has experienced price increases this year. The upward movement in price became evident last February as auctions began. It was inevitable that prices would rise as historically the Melbourne property market rarely remains stagnant for more than two years.
Early auction results in 2020 indicated that prices were going to rise sharply however the outbreak of covid put a temporary halt on the price surge.
Lack of quality properties for sale has always been a problem for the Melbourne market. This has certainly been the case over the last 6 months. Because of their excellent liveability and exceptional investment performance it is not surprising owners are reluctant to sell.
Auction clearance rates remain high, the reported figures over the last 12 months have been consistently over 70 per cent. The acute lack of quality property is substantially contributing to this high figure.
Melbourne’s rental vacancy rate remains high at around 6%. The hardest hit segments are the high density towers in and around central Melbourne. A balanced rental market sees vacancy rates at around 3%. To give some perspective, Melbourne’s vacancy rate consistently hovered around the 2.2% mark prior to the pandemic.
Following the Reserve Bank meeting in July 2021, the cash rate remains at 0.1 per cent.The current rate is at an all time low.
According to the Australian Bureau of Statistics (ABS) gross domestic product (GDP) rose 1.8 per cent during the March quarter of this year. This follows a record 7.0 per cent decline in the June quarter of 2020.
The Australian unemployment rate fell to 4.9 per cent in June. This was 0.4 percentage points below March 2020 (5.3 per cent) and the lowest it has been since December 2010. However under-employment remains a problem.
According to the (ABS) the Consumer Price Index (CPI) rose 0.8 per cent this June quarter. Over the twelve months to the June 2021 quarter, the CPI rose 3.8 per cent.The most significant price rise was automotive fuel (+6.5 per cent).
The Melbourne market has peaked at a new higher overall price point for 2021. In my opinion another price surge this year would not be sustainable or economically viable. Whether another spurt occurs next year remains to be seen.
Traditionally the Melbourne market closes down for the summer break towards the end of December. Auctions begin in full force the following year towards the end of February. It is only then that we will see if there is pent up demand which will result in further price increases.
If covid can remain in check I am confident there will be more quality opportunities coming onto the market especially during the upcoming spring selling season. The current buoyant market should give property owners enough confidence to take the plunge.This certainly would be good news for buyers!
