House prices lift in March quarter with surprise rise in Melbourne

Melbourne’s property market has staged a surprise turnaround in the March quarter, with the median house price up 1.6% to $529,00, while Sydney has met most analysts’ expectations of incremental growth of 1.4% to $641,000, according to the latest house price report from Australian Property Monitors (APM).

Australia’s two biggest cities were the strongest mainland performers during the quarter as house prices increased nationally by 0.9% on the back of increased buyer and seller confidence at the start of 2012.

There was a small increase in Perth house prices of 0.1% over the quarter to a median of $531,000 following a similar increase in the December quarter.

There were small house price decreases of 0.3% in Brisbane ($433,000) and Adelaide ($437,000), with the Queensland capital remaining the most affordable of the mainland capital cities – registering a median house price below Adelaide for the second successive quarter.

“The Perth, Brisbane and Sydney markets remain the best prospects for growth over 2012, and although Melbourne’s performance has been encouraging so far this year, this may prove to be short-lived if the Victorian economy continues to deteriorate,” says Dr Andrew Wilson, senior economist at APM.

He attributed the improvement in median house prices in most capital cities over the March quarter to “increased buyer activity together with rising auction clearance”.

Wilson says the first three months of data are positive signs for most Australian housing markets, “with the likelihood that buyer and seller confidence will continue to rise in 2012 after a subdued 2011”.

Over the past 12 months, Sydney has been the strongest mainland housing market with prices down 0.9% while Brisbane (4.1%) just shades Adelaide (3.9%) for the weakest performing markets over this period.

Sydney is also benefiting from a return of investor activity.

Wilson says ABS housing finance figures show that NSW is the only state to be tracking higher on investor loan activity than in 2010, “an impressive early result for confidence in that market”.

Among the smaller capital cities Darwin experienced a strong bounce in house prices which rose 6% to $629,000 – only $12,000 less than the median Sydney house price.

House prices rose in Canberra (0.9%) and Hobart (1%) over the quarter.

Unit prices remained virtually flat with just 0.1% growth, with Sydney also the standout performer with prices up 2.5% to $462,000.

The Brisbane and Adelaide unit markets were particularly weak, with quarterly declines of 5.4% and 5% respectively, dragging down Brisbane’s median unit price to $339,000 and Adelaide’s to $286,000.

Melbourne unit prices continued to fall, with prices down 2.1% to $389,000. Melbourne unit prices are down 5.1% year-on-year.

The more volatile Hobart unit market increased by an impressive 11% to $275,000 over the quarter, following no change in prices in the December quarter and a decline in the September quarter.

The weakest unit market over the past 12 months has been Brisbane, with unit prices down 8.8% followed by Adelaide with a decline of 6.6%.

This article first appeared on Property Observer.