Melbourne home values have reached a record high, in a sharp turnaround from the depths of the pandemic-induced recession last year.
Property values surpassed their April 2020 peak by 0.2 per cent, on CoreLogic data published on Monday, reaching a median of $736,478 across both houses and apartments.
Values fell just 6.1 per cent in last year’s crisis, a shallower downturn than economists expected as they eyed drops of between 10 per cent to 20 per cent as the economy went into hibernation.
Since the market bottomed late last year, values have rebounded 6.7 per cent amid strong pent-up demand following last year’s extended lockdown, ultra-low interest rates and government incentives.
Buyers have been offering large sums at auction to avoid missing out on the expectation that mortgage rates will stay low for years, sending the preliminary clearance rate to a strong 81.2 per cent on Saturday, based on Domain figures.
Values are also 13.8 per cent above the trough reached in mid-2019, when the market slumped off the back of a crackdown on lending to investors and riskier borrowers.
“Part of the reason for such as sharp rebound in housing values can be drawn back to the strength of the economy and associated surge in consumer sentiment,” CoreLogic’s executive research director, Tim Lawless, said
“With economic conditions consistently beating forecasts and interest rates likely to remain at record lows for an extended period of time, Australians are feeling more confident to make high commitment decisions,” he said.
The current rate of growth was not quite as strong as pre-COVID, he said, at a rolling three-month growth rate of 4.8 per cent, lower than the 6.4 per cent clocked over the three months to November 2019.
But the top end of the market has been driving gains and was likely to outperform the city average, he said.
Although the pace of gains slowed half-way through March, the market appeared to have plenty of momentum, he said.
“We are expecting housing values will continue to rise though the year and probably next year as well, as long as interest rates remain at their record lows,” he said.
“However, we are expecting affordability constraints will progressively prevent more prospective buyers from participating in the market, which is likely to see the strong pace of capital gains gradually reduce.”
The current boom has been led by owner-occupiers and first-home buyers, but the last time values were this strong demand was more skewed towards investors, he said.
“We are expecting first-home buyer numbers will begin to taper as affordability constraints become more pressing and incentives such as stamp duty discounts expire.”
Sydney’s property market reached a record high this month, according to the same data series, with low interest rates generating a fear of missing out as prices rise.