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Hewison Insights
Property Prices

Has the bubble burst?

Simon Curtain
Partner/Private Client Adviser
27 Apr 2011

The medium house price in Melbourne dropped 6 per cent over the past three months to $565,000 (previously $601,000).  This is off the back of strong growth over the past five years (the median house price five years ago was $305,000, a 61.4 per cent increase).

So has the bubble burst or is this simply the market pausing for breath?

While growth in the market has definitely slowed there are still some key positives for the property market in general. As we know, Melbourne and Australia generally, has a growing population and it will be no surprise that most people prefer to live as close as they can to the city. This high demand for inner-city property translates to higher prices.

Even out in the ‘burbs’ the effects of supply and demand are at play. While there may be an abundance of land for potential home buyers to purchase, the developers who own the land are canny enough to only release enough land to ensure prices remain high.

Instead of the bubble bursting, the Real Estate Institute of Victoria (REIV) expects the Melbourne market to enter a period of lower growth, pointing out that we cannot expect the 20 per cent increases seen in previous years to continue.

We are of the same opinion; while prices may contract further it will be in a controlled manner, so if you’re waiting for market value to dip before buying your next investment, you could be waiting a while before we see any significant movement.

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.