The Australian dream is alive and well

Author: Gil King, CEO, Real Estate Institute of Victoria
Date: 30 Apr 21

The real estate sector is abuzz with talk about REIV’s March quarter median price data, which show historic increases for a number of areas in Melbourne and regional Victoria.

For the first time, houses in metro Melbourne surpassed a median value of $1m jumping by 8.8 per cent from the previous quarter to land at $1,004,500.

We need to look beyond the hype to see the full picture.

In regional Victoria, houses surpassed $500,000 for the first time with a 4.1 per cent increase from the December quarter, and 12.3 per cent annual growth. While regional unit prices recorded a 5.9 per cent quarterly increase, they are now 19.1 per cent more valuable than they were 12 months ago.

Many city-dwellers are taking up residence in regional Victoria, as flexible working conditions are being embraced and encouraged by more and more organisations.

Gains in regional Victoria show that the benefits of the strong market have been spread around the state, not just in the traditional inner suburbs. Victorians are looking beyond the inner suburbs to find the lifestyle they want. These intra-state migrants will help to create jobs, boost local businesses, and revitalise regional communities.

Across the country, the number of first home buyers increased to 45,759 in December quarter, up 24.7 percent (Real Estate Institute of Australia December Quarter Report), with Victoria experiencing a similarly positive trend.

Loans to first home buyers now make up 42 per cent of the owner-occupier market (Australian Bureau of Statistics, 2021), and credit growth in Australia from investment housing and owner-occupier housing has also been showing a positive trajectory throughout 2020 and into early 2021.

These numbers demonstrate that new entrants to the property sector are taking advantage of beneficial market conditions and incentives, such as low interest rates, first home buyer grants and mortgage repayment holidays.

With Victoria’s property sector reaching an estimated 35,000 transactions in the March quarter – the highest prior-corresponding-period result since 2015 – it’s important to consider if this performance is indeed sustainable.

To answer this, we need to look at a few important external influences for the sector over the six to 12 months:

  • How significant an impact will the new Residential Tenancies Act have on property owners – will investors consider other investment options as they realise how onerous the new rules are for landlords?

  • How will the continued closure of international borders impact overseas investors?

  • How might credit levels change if interest rates rise?

  • will fewer international students and less migration contribute to downward pressure on rent levels?

  • How long will government play a role in providing incentives for first home buyers?

They’re all critical factors people in the sector should be attuned to.

But, in the meantime, we can take a moment to reflect on the fact that the property sector in Victoria is a significant economic contributor that’s enabling opportunity for more and more Victorians every day. According to the numbers.

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