THE Melbourne housing market recorded a 1 per cent bounce in dwelling values in June, a bit of a surprise for many people following the market trends.
The improvement in values over the month needs to be kept in context and it will be important to monitor the month-to-month movements to see if the June rise marks a turning point.
Month-on-month movements are arguably less important than the trend: over the June quarter Melbourne dwelling values were 3.4 per cent lower and, since values peaked at the end of October 2010, they have corrected by a cumulative 9.6 per cent.
Looking at the June results in more detail, it is clear that the 1 per cent gain was due entirely to house values rising rather than unit values. House values rose by 1.4 per cent over the month but were down 3.1 per cent over the June quarter while unit values recorded a weaker 1.4 per cent fall over the month and 5 per cent fall over the quarter.
Looking at the market performance across broad price points, we are seeing weaker conditions on the premium sector of the housing market compared with the more affordable end and broad ”middle”-priced suburbs.
Melbourne’s most expensive suburbs have seen values fall by 11.1 per cent since the peak while the most affordable 20 per cent of Melbourne suburbs have seen a 6.6 per cent drop.
Other indicators across the Melbourne market are either holding steady or showing some improvement.
The average time it takes to sell the typical Melbourne house has dropped from 76 days in February this year to 64 days in May, while units are taking a slightly shorter time to sell at 54 days on average (down from 80 days in February).
Additionally, vendors have reduced their average level of price discounting. In May the typical Melbourne house sold at a contract price that was on average 7 per cent lower than the asking price. The rate of vendor discounting peaked at 7.9 per cent in July last year. For units, average discounting rates are now at 6 per cent, down from a high of 6.8 per cent earlier this year.
Auction clearance rates have averaged about 55 per cent over the first six months of 2012, which is about five percentage points higher than what was recorded over the second half of last year.
Overall, each of these indicators points to market conditions that are below average, but we are not seeing a deterioration in selling time, vendor discounting or clearance rates.
The largest obstacle to a market recovery is likely to be the number of homes now being advertised for sale. RP Data is tracking just under 41,000 houses and units available for sale across Melbourne.
That works out to be roughly seven months of supply based on the average rate of sales over the past year.