Melbourne home prices on slow recovery, buyers scared off by monster mortgages: PropTrack Home Price Index

Melbourne property prices continued a slow recovery in June after last year’s interest rate hikes, as a leading economist warns buyers are being scared off by the idea of a big mortgage.

Melbourne property prices continued a slow recovery in June after being smashed by interest-rate hikes last year.

But they’re being outpaced by the rest of the nation, with a leading economist warning the slow growth is being compounded by buyers across the suburbs who are scared off by the idea of a big mortgage.

PropTrack’s latest Home Price Index revealed that despite rising marginally in June to reach $803,000, the cost of an average home in Melbourne is still 5.2 per cent lower than its peak in March last year.

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It is also 2.93 per cent below where it was a year ago.

While the data showed Melbourne house and unit prices are up by 15.3 per cent since the start of the pandemic in March 2020, they fall a long way short of growth star Adelaide, where homeowners are a whopping 48.8 per cent better off.

Ray White head of research Vanessa Rader said mega mortgages were scaring buyers away from the market.

Ray White head of research Vanessa Rader said a lack of volume in listing numbers played a part in Melbourne’s growth lag in addition to “a bit of fatigue in the market” after rate hikes increased mortgage repayments.

“There’s still good population growth and international migration has come back but I think finances are a big issue and a lot of people are sitting on their hands,” Ms Rader said.

“The size of mortgages are a bit bigger than other cities, other than Sydney, so buyers aren’t willing to jump into the market.”

Ms Rader added that until there was more certainty in the market, Melbourne would likely continue having lower transaction activity.

“There’s limited activity as people in Victoria are more hesitant to make a transaction and there’s a lot of uncertainty with employment too,” she said.

PropTrack economist Angus Moore weighs in.

While stock is slowly returning to the market, PropTrack economist Angus Moore warned that the hangover from consecutive interest rate rises had seen properties remain on the market for longer periods of time — another hint buyers are wary.

“Homes are taking longer to sell than they were 18 months ago,” Mr Moore said.

“Over the past 12 months it has typically taken 41 days for property to sell compared to about 30 days 18 months ago.”

However, he added that homes were still selling quicker than they were pre-pandemic when properties lingered on the market for about 50 days.

Despite Melbourne’s only marginal price recovery in June, Mr Moore said it was still a “big change” compared to the falls seen last year.

“Melbourne hasn’t seen as big of a recovery as other parts of the country but it’s still seeing positive growth broadly speaking,” he said.

“Prices have risen by 0.8 per cent since January this year which is nothing like the pace of growth we saw in 2021, but it’s still a change to what we were seeing last year.”

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