record property drop in melbourne

Interest rate rises behind record property drop
Article from: Herald Sun

Ian Royall

April 26, 2008 12:00am

MELBOURNE'S property prices have plunged 8.4 per cent, or a record $40,000, since the start of the year.

Official figures show the median house price for the March quarter was $432,500, down from $472,250 for the previous three months.

Four interest rate rises in eight months and the prospect of another soon had hit the market hard, Real Estate Institute of Victoria chief executive Enzo Raimondo said.

"The foreseeable future is the market will be more stable," Mr Raimondo said.

"The next quarter will confirm property prices will remain stable, depending on whether we get another interest rate rise."

But in the past 12 months, prices had still risen by 14.4 per cent a year, thanks to last year's boom.

Mr Raimondo said that stock shortage and fewer buyers at auctions had also taken their toll.

"Purchasers are now making a considered approach to the market," he said. "Vendors and buyers now need to adjust to a different market."

The biggest growth areas were on the Mornington Peninsula and the metropolitan development corridors.

In the past, inner-city areas enjoyed sustained growth as the outer suburbs faltered.

Blairgowrie's homes were worth 18.4 per cent more, up to $610,000, while prices in Berwick, Sanctuary Lakes, Pakenham and Taylors Lakes jumped 11 per cent or more.

Brighton was the most expensive suburb with a median of $1.675 million.

Toorak had fewer than 30 sales, but its median was $3 million for the quarter.

The latest results are a far cry from six months ago when Melbourne prices soared by more than $50,000 in three months -- a record rise.

The latest three-monthly fall follows price falls in coinciding first quarters of the past seven years, but they were drops of 2 or 3 per cent.

Buyers' advocate Melanie Opie, of Keyhole Property Investments, said the market was offering more stability.

"Last year, prices were like a rocket and not stopping, and there was so much unpredictability," Ms Opie said.

"This year, though, more properties are selling prior to auction, whereas last year vendors wanted to have their day in the sun."

Regional areas did better. Median prices in the Greater Bendigo area rose by 5.3 per cent to $239,950, ahead of Ballarat, which rose 2.1 per cent to $240,000.

Property sales in the Greater Geelong area slipped by 0.8 per cent to $325,000.