Residential market rebounds

Mr Raimondo, CEO, REIV said "Whilst the December quarter figures are encouraging, the better than expected result doesn’t signal a return to high growth levels and should be seen in the context of the previous 12 months.

"The result can primarily be explained by a surge in market confidence following the federal election result, subsiding fears about imminent interest rate rises and a large jump in first home buyer activity. With clearance rates at around 60 per cent and evidence of renewed confidence by sellers as listings start to pick up, the market is showing a return to normal levels of activity.

"We forecast flat to modest price growth over the next twelve months, as the market continues to reflect a new property cycle. Despite gloomy predictions last year of a ‘property price crash’, the residential housing market has proved resilient and clearly experienced a soft landing. Large scale and sustained price falls are highly unlikely in an economic climate of low interest rates and low unemployment and high levels of consumer confidence.

"Suburbs within 10 kilometres of the CBD are generally expected to perform best, and particularly homes with unique characteristics, prestige and growth history and easy access to amenities and schools," he said.

The Melbourne apartment market recorded a median price rise of 4.1 per cent over the quarter, from $290,000 in the September quarter to $302,000 in the December quarter 2004. This was a 2.4 per cent increase over the past 12 months.

Mr Raimondo said "Melbourne’s new apartment market remains over-supplied, with large numbers due for completion this year, though with strong owner-occupier demand and good prospects over the longer term."

When assessing the regional results, Mr Raimondo believes that local factors such as significant new retail, agricultural and business investment largely explain, and are expected to continue to be the main influence.

"Geelong’s median price was the same at $250,000, representing a 3.2 per cent rise over the past 12 months. Ballarat’s median also remained steady at $195,000, with a 2.5 per cent fall over the last 12 months. Bendigo’s median house price rose a strong 7.3 per cent over the quarter to $220,000, a rise of 7.6 per cent over the past 12 months," he said.

Melbourne’s residential vacancy rates rose marginally by 0.1 per cent to 3.8 per cent in the December quarter 2004, which is 0.1 per cent below that recorded this time last year, and moving closer to the balanced market rate of 3.0 per cent.

The Victorian regional vacancy rate decreased to 1.7 per cent, a 0.6 per cent fall from the September quarter 2004, and 0.4 percent below that recorded in the December quarter 2003, confirming the continuing strong demand for rental accommodation in regional areas.

Newly completed and previously untenanted inner-city apartment market (CBD, Docklands, St Kilda Rd and Southbank) vacancy rates fell to 6.3 per cent, down 0.2 per cent from the September quarter, well below the 10.0 per cent recorded in the December quarter 2003.

The residential vacancy rate for apartments not newly completed and previously tenanted in inner Melbourne (0-4km from the CBD) fell slightly over the quarter to 4.1 per cent. Inner Melbourne (4-10km from the CBD) recorded a vacancy rate of 4.2 per cent, remaining stagnate over the quarter, with middle Melbourne (10-20km from the CBD) falling slightly over the quarter to 3.5 per cent. Outer Melbourne (20km plus from the CBD) recorded an increase in vacancy rate to 3.6 per cent.

Mr Raimondo said "Continuing the trend for the majority of 2004, there was minimal movement in vacancy rates throughout most of Melbourne due to lower levels of new stock entering the market.

"Apartment vacancy rates can be expected to rise slightly in 2005 with large numbers of apartments due for completion in inner Melbourne."

Geelong’s vacancy rate fell to 0.4 per cent, Bendigo’s rose to 2.2 per cent, while Ballarat’s rose to 3.0 per cent, during the December quarter.

"Regional Victoria continues to reflect a balanced market with vacancy rates remaining very low and consistently below the three per cent mark, due to strong rental demand and a decrease in new stock levels as investor demand weakens," he said.

Vacancy rates for other Victorian regions again remain very low for the December quarter, with Wodonga (2.3 per cent), Wimmera (2.2 per cent), Shepparton/Goulburn (2.3 per cent), East Gippsland/Wellington Shire (2.2 per cent), Warrnambool/Western District (1.5 per cent), Latrobe Valley/South/West Gippsland (2.6 per cent), and Mildura/Mallee (1.5 per cent) respectively.