PETER MARTIN
January 1, 2010
The Age
MELBOURNE house prices soared by 17 per cent in the first 11 months of 2009, outstripping growth in all other capital cities, new figures show.
The latest RP Data index, compiled from Valuer-General’s figures, indicates the Melbourne median house price hit a new record of about $580,000 in November.
The news came as the Australian sharemarket closed at its highest level for the year. The S&P/ASX 200 index finished yesterday at 4870.6, up 31 per cent for the year and 55 per cent from its trough.
Melbourne’s 17 per cent house price jump eclipsed Darwin’s 15 per cent, Hobart’s 14 per cent and Sydney’s 12 per cent. And the rise more than offset the 5 per cent slide in Melbourne prices that followed the global financial crisis.
Melbourne’s median apartment price increased even more strongly, up 19 per cent to $440,000.
RP Data cautioned that the November figures were preliminary and based on incomplete sales data. However, the inclusion of further sales figures would be unlikely to alter the strong upward trend.
CommSec economist Craig James said immigration was a key driver of prices, with Victoria receiving more than its proportional share.
“With population growing at the fastest rate in 40 years boosting demand for homes, state and federal governments need to be focused on ways to get more homes built,” Mr James said.
“Barriers to housing investment need to be removed, and scrutiny needs to be applied to lifting land production and revising zoning laws.”
House prices continued to rise in October and November despite successive interest rate rises in those months and the winding back of first home buyer grants.
“First home buyers have been trending down since peaking in May,” said RP Data research director Tim Lawless.
“But the gap is being filled by upgraders and investors who are much less sensitive.”
Credit figures released yesterday showed borrowing for housing up a further 0.7 per cent in November and up 8 per cent over the year.
Mr James said the resilience of the housing market increased the chance of a further interest rate rise when the Reserve Bank board next meets in February.
“The main worry is that home prices are rising at unsustainable rates in some capital cities such as Darwin, Hobart and Melbourne,” he said. “The last thing anyone wants to see in 2010 is another boom-bust scenario.”
Mr Lawless said he expected more modest house price growth in 2010 after an “exceptional and surprising” 2009. “We would expect conditions to moderate into 2010 as interest rates continue to move back to a neutral setting and the remainder of the stimulus is rolled back,” he said.
“But the primary driver of growth will continue to be an under-supply of housing coupled with extraordinary demand fuelled by population growth.”
Yesterday’s sharemarket peak of 4870.6 is still a long way from the pre-financial crisis high of 6851. And there is little joy for investors in The Age’s half-yearly economic survey to be published tomorrow, with economists predicting a rise of just 5.4 per cent in share prices this year.
