Given the state of the economy the latest release of the REIV median house price data has been widely anticipated. The headline figure revealed that Melbourne’s December quarter median was $426,000; this represents a decline of 0.9 per cent over the quarter and a drop of 9.7% for the 12 months from December 2007 to December 2008.
It is important to understand that headline figure is a representation of Melbourne’s residential market. It does not reflect the change in value to each individual property.
Research undertaken by the REIV shows that in the December quarter 2007, 16.4 per cent of residential property transactions above $800,000. During the December 2008 quarter this dropped to 11.8 per cent. Over the same period there was a reversal in the trend for more affordable property. During this period the number of residential transactions at less than $500,000 jumped from 59.3 per cent to 66.7 per cent.
The December quarter 2007 signaled the end of the property boom, which at its height saw an unprecedented level of transaction numbers and unsustainable price growth. By the end of 2007 the property boom was replaced by the sub-prime crisis, which quickly evolved during 2008 into the global financial meltdown.
Our research confirms that during the downturn in the economy and the associated decline in consumer sentiment, demand for property in Melbourne’s more affordable market suburbs increased while demand for more expensive property reduced. This trend would also have been influenced by the increase in the first home buyer’s incentives and the reduction in interest rates late in 2008.
The result has seen Melbourne’s headline median decline, but an increase in the median of Melbourne’s more affordable suburbs and mid-tier suburbs, such as Broadmeadows, Craigieburn and Rowville.
