Melbourne house prices fall $61,000 over the course of 2022 as interest rates rise
Home prices are now 5.6 percent, or about $61,000, below the peak reached in December 2021, but are still 17.2 percent higher than the mid-2020 trough.
Prices varied in different parts of the city.
Home prices fell 0.9 percent in three months to $790,000 in the Northeast and by the same amount to $1,635,000 in the Inner East.
In Melbourne’s north-west suburbs, house prices fell 1.3 percent in three months to a median of $700,000.
In downtown Melbourne, however, prices rose 3.1 percent to $1.41 million during the quarter.
The more stable market is good news for tech entrepreneur Andrew Ellett and his wife Jacquie, who are selling their Richmond home to buy a larger one to renovate closer to their daughter’s school.
HelpPay co-founder Ellett is confident that his recently built turnkey home will attract interest from buyers looking for homes that require little work after construction costs have risen during COVID-19.
Ellett said he’s happy to wait until costs have come down and more building materials are available before beginning the renovation.
“We’re going to get something like a Victorian house and give it a complete makeover… something that would suit a young, growing family,” he said. “We can wait out all these logistical nightmares, even if it takes a couple of years.”
Ellett’s agent, Ray White Balwyn director Brad Cooper, said quality homes still sell well.
“I’m really bullish on the market as the Reserve Bank has announced that there will only be a few more rate hikes,” Cooper said. “It gives people more security – buyers can factor in the increases and plan for the future.”
The head of the CBA’s Australian economics department, Gareth Aird, expects prices to fall further in Melbourne and said the biggest driver is rising interest rates.
CBA expects another 0.25 percent hike, taking rates to 3.35 percent in either February or March before a pause. Rate cuts would start in late 2023, he predicted.
“Melbourne will soon go back to its pre-pandemic prices because it hasn’t seen as much of a price hike as Sydney so there is less to come back from,” Aird said.
Melbourne’s strong rental market has kept prices more stable, he said, as higher rents have helped owners cope with rising mortgage payments.
Melbourne also saw a surge in overseas migration as international students returned.
“A lot of migrants go to Melbourne or Sydney first and that’s at a time when rents are rising pretty fast – that will offset the rate hikes and keep values high.”
ANZ Senior Economist Felicity Emmett was surprised by the pause in Melbourne home price declines but thought the downturn should continue this year.
“If you look at what’s happening with interest rates and how that’s affecting borrowing capacity, that’s going to continue to weigh on prices,” Emmett said.
ANZ has forecast a 16 per cent peak-to-trough fall for the Melbourne property market based on expectations that the federal funds rate would peak at 3.85 per cent and remain stable until rate cuts in late 2024.
https://www.smh.com.au/property/news/melbourne-house-prices-in-deepest-annual-fall-for-more-than-three-years-20230124-p5ceyw.html?ref=rss&utm_medium=rss&utm_source=rss_property Melbourne house prices fall $61,000 over the course of 2022 as interest rates rise