You may recall on December 8th I wrote, ‘Are we up 10% in 10 weeks?’:
I suggested that prices for period homes in Stonnington seemed to be up 10% in the 10 weeks since Stage 4 lockdown ended in late September. I thought I was being flippant, but it turns out I was right.
The latest REIV data shows that Melbourne’s median house price jumped 9.5% in the December quarter. This was the largest quarterly improvement in metro Melbourne for 21 years.
Malvern East led the way with an incredible 28.5% increase in the median house price over the quarter.
I’ve said before that these quarterly median prices can be very misleading when only looking at one individual suburb and thus a small sample size of sales.
Digging deeper, out of 61 house sales in Malvern East there were a handful at $5m+ and one that was incorrectly reported as $16m so these could greatly skew the median price.
Still, when you look at the city as a whole, 9.5% is incredible growth in a very short period of time. And it was evident on the street as we observed houses selling within two weeks for hundreds of thousands of dollars over reserve. It was a frenzy.
Regional Victoria was up 9.2% for the quarter, which is interesting as most assumed regional centres were outperforming the city.
Melbourne apartments were up 2.5%, which seems about right. Although I’m sure the quality older style apartments were up much more while newer and larger developments struggled.
Overall, when you include the short term price falls we faced when COVID hit (March to September) the annual growth rate came out at 8.4% for Melbourne houses in 2020, which is rather impressive given all the time we spent in lockdown.
So why the record growth in the December quarter?
Well, it turns out the clichéd ‘pent up demand’ argument proved true. Buyers were eagerly waiting, trapped in their homes for months on end, cashed up with record low interest rates, high savings, nowhere to holiday and needing more space to work from home.
But surely the biggest driving factor by far is the record low interest rates. 1.99% fixed for four years. That’s a lot of extra borrowing capacity compared to the 3.99% most people were servicing just a couple of years ago.
Throw in plenty of Government stimulus, including a 25% stamp duty discount for existing properties up to $1,000,000, and you can start to see why demand is so strong right now.
So where to from here?
We still live in uncertain times so no one knows. We are somewhat at the mercy of an unpredictable virus and an equally unpredictable Government.
But right now there’s a lot more positivity than negativity. There also seems to be more demand than supply. And I just can’t see a flood of stock on the horizon. So my money is on continued growth for 2021.
We have our first auction campaigns for the 6th February starting today and early signs are pointing to some very busy open inspections this weekend with a fresh crop of buyers venturing out for the first time.
We should get a very good gauge of the market in the coming weeks as new properties continue to start each week and the first round of auctions get underway.
Thanks for reading and please let me know if I can help with your next move.