While some commentators had been predicting a “photo finish” for the Melbourne Cup day Reserve Bank (RBA) decision on interest rates, in reality there was little likelihood of any change. The Finder.com.au survey of 30 experts released prior had revealed 90% had expected the cash rate to remain on hold at 1.5%, with 69% tipping a further cut in the first half of next year.
A couple of days after the rates announcement, respected industry analyst Louis Christopher of SQM research released his annual “Boom and Bust” housing report, predicting double digit price growth of up to 18% in Melbourne in 2017 if rates are cut further. At the same time, Christopher cautioned that the Melbourne property market is at its most overvalued point on record with values up to 40% overvalued. Christopher called on the RBA to increase rates or for APRA to introduce further lending restrictions to reduce the likelihood of a correction in 2018, saying the market is now teetering dangerously close to a bubble.
Regardless, the Melbourne property market continues to forge ahead in the face of continuing strong demand and a limited number of properties for sale. CoreLogic’s October Hedonic Home Value Index showed Melbourne prices rose by 0.8% last month, putting the quarterly growth at 4.6%. Melbourne is continuing to outpace Sydney, where growth in October was at 0.6% and quarterly growth sat at 2.9%. Total Melbourne price growth is now up 9.1% on an annualised basis, following the 12.8% growth of the previous year.
While predicting the future is notoriously difficult in the property market, current conditions remain exceptionally buoyant heading towards Christmas with new records being set in many areas, particularly at auction. Domain Group reported the Melbourne auction clearance rate rose 75.3% in September to 76.2% in October.
The market continues to be characterised by a shortage of properties for sale as vendors hold back. Reconsideration of that position may well be wise, with Geoff White, chief executive officer of the Real Estate Institute of Victoria saying the Melbourne property market has “never been better” for sellers of apartments and houses.