Melbourne’s median house price has officially soared past $1 million in what is a new price record for Victoria’s capital.
The latest Domain House Price Report for the June quarter showed Melbourne’s house prices jumped by almost $41,000 or 4.1% over the June quarter – and 16.2% over the year – to reach a new median house price now sits at an impressive $1.022 million.
That means that house prices rose by about $445 per day in the three months to June or 4.1 per cent.
And all this was done in spite of a global pandemic and a snap lockdown in the middle of the quarter as the state grappled with a Covid-19 outbreak.
Since Melbourne emerged from lockdown in late-2020, house prices have risen rapidly, meaning the city has seen three consecutive quarters of growth above 4%.
This hasn’t been seen in the city’s data since it’s a post-GFC rebound.
This means Melbourne had its strongest annual increase in 11 years, up 16.2 per cent or $142,000.
The bounce-back is a result of pent-up demand and changed housing needs as a result of the pandemic, with buyer sentiment spurred by cheap credit and a rebounding economy.
By area, house prices across all Melbourne regions are now at new record highs, apart from the inner east remaining close to a peak.
The price rises are broad-based across the city, with several individual regions posting double-digit gains.
Sea-changers sent Mornington Peninsula house prices up 21.8% in a year to a median of $895,000, while other big movers were the outer eastern suburbs (up 17.2% to $860,000) and the inner south (up 16.5% to $1.49 million).
Melbourne’s inner suburbs and northeast each rose by at least 10%.
Melbourne’s unit prices have also surged
Unit prices have also reached a new record high at $572,793, up to $4,000 over the June quarter.
But the rate of growth for units is subdued relative to Melbourne’s rate of growth for houses, meaning there is the biggest divergence in prices on record.
But the benefit of this is it provides an opportunity for buyers facing affordability constraints and the psychological hurdle of contemplating how to buy a house with a seven-figure median price.
By area, Melbourne’s outer east and Mornington Peninsula are the only areas with record-high unit prices.
Whereas inner-city unit prices remain $27,000 below the mid-2017 high and the inner east $37,000 lower than the late-2019 peak, offering negotiation opportunities for buyers.
Melbourne’s median unit prices
Melbourne’s lockdowns have caused a wave of upsizing
The results from Domain’s latest quarterly House Price Report again highlighted the perfect storm for rising house prices: low-interest rates, low housing supply versus against strong demand and government stimuli.
The combination is expected to further aggravate prospective first-home buyers and upgraders who continue to be blocked out of the market as rising prices make buying property out of reach for many prospective buyers.
Specifically for Melbourne, it appears that months of lockdown have shown the flaws in existing living arrangements, with a wave of Melburnians keen to upsize into more spacious abodes with a home office, Domain explains.
And this trend is in line with what we have already seen – Covid-19 has changed the way we live our lives, and most importantly, it has changed what we want from our homes.
Australians are increasingly prioritising spacious living and separate study areas in their next home amid Covid-19 restrictions.
This, combined with cheap mortgage rates, any savings from canceled travel or excursion plans or inability to spend on entertainment, low property supply, and government stimulus means buyer demand for properties is strong, with buyers competing hard for the few homes listed for sale.
So it’s no wonder that Melbourne has seen its strongest annual price rise in 11 years.
“We’ve placed a greater emphasis on our homes because we’re spending more time in them,” Domain chief of research and economics Nicola Powell said.
“It’s spurred on purchases, or it’s brought forward decisions.”
Powell expects prices in the city to keep rising, although not at the same “frantic” pace as affordability bites and more supply comes onto the market when sellers are enticed by record prices.
“The seven-figure median is really such a psychological hurdle [for buyers] … It really is disheartening for first-home buyers when you’re staring down the barrel of a million-dollar median,” she said.