melbourne house price fall largest since gfc

* Felicity Williams
* From: Herald Sun
* May 03, 2011 12:00AM

Melbourne property prices fell 2.5 per cent in the three months to March. Picture: Chris Groenhout. Source: HWT Image Library

MELBOURNE house prices have suffered the worst start to 2011 of any city, barring flood-ravaged Brisbane, falling at the fastest rate in two-and-a-half years.

As households struggle with higher interest rates and soaring prices for petrol, groceries and utilities, official data showed yesterday that house prices fell 2.5 per cent in the three months to March compared with the previous three months.

The result is Melbourne's biggest house price decline since the height of the global financial crisis in the 2008 September quarter and matches the 2.5 per cent decline in Brisbane in the aftermath of the floods.

On the eve of the Reserve Bank of Australia's monthly board meeting to discuss interest rates this afternoon, the Australian Bureau of Statistics quarterly house price index also revealed a bigger-than-expected 1.7 per cent drop across Australia's eight capital cities.

the Australia-wide decline surpassed the market consensus for a 0.5 per cent fall.

"The housing market slowdown that began in June last year has carried into early 2011 but remains uncertain in magnitude," he said.

"Australia-wide, conditions may not be deteriorating more rapidly but they are also yet to show definite signs of stabilising."

Elsewhere in the report, the ABS revised down its house price movements in Melbourne for the 2010 September quarter to a 1.8 per cent decline from its previous 1 per cent gain.

JP Morgan economist Ben Jarman said Melbourne house prices were retracing ground after strong gains in recent years.

Melbourne house prices soared 26.3 per cent in the March quarter last year, before the Federal Government withdrew its temporary boost to the first homeowner grant introduced as a fiscal stimulus measure during the financial crisis.

Real Estate Institute of Victoria spokesman Robert Larocca said Melbourne house prices were likely to remain broadly level for the rest of the year, although the Baillieu Government's expected 20 per cent cut to stamp duty in the state Budget today might entice more first home buyers to the market.

"First home buyers have vacated the market to a large degree, so we're hoping the proposed cuts to stamp duty will help bring some of them back," he said.