Have you ever seen a market like this? Industry veterans of 30+ years say they haven’t.

House prices have fluctuated more in the last 4 years than at any time in living memory. The continued up-down-up-down-up cycle has felt like a rollercoaster.

These extraordinary market conditions are illustrated in the below graph. It shows the rolling 3-month Median $ House Price in Melbourne, and highlights the peaks and troughs we’ve experienced in such a short time.

At the end of 2017, in a similar publication to this, we reported that house prices had risen 60% over the previous 5 years. They then fell over the next 18 months. Writing again in mid-2019: “Median house prices decreased significantly to sit about -12% down from their peak. As painful as it is to acknowledge, we’ve experienced the sharpest market correction seen in over 40 years.”

Natural cyclical forces kicked in, prices began recovering, and momentum started to really build at the end of 2019. The start of 2020 felt like the beginnings of a sustainable growth period.

Enter COVID-19 and a global pandemic.

Buyer demand dried up almost overnight, and the multiple Victoria lockdowns made listing a property for sale nearly impossible. Only the most highly motivated vendors chose to list their properties, often selling quietly off-market. In the space of just a few months, prices dropped again by around -8%.

We wrote in Spring last year, “The market had only just started to recover from the sharpest price falls in living memory. In the absence of a global pandemic, we would be in a very different market right now. Once some normalcy returns, expect natural cyclical forces to reassert themselves.”

Price growth hasn’t returned gradually – it’s come roaring back. In hindsight though, the resurgent market makes some sense…

Locked in homes to one extent or another for much of 2020, many people emerged into the market with a renewed sense of purpose – to finally upsize, downsize, invest, or purchase that long talked about holiday home. Government support initiatives, numbered in the hundreds of billions of dollars, have ironically made many people better off financially than before the COVID crisis hit. And, of course, we have remarkably low interest rates.

Today’s market is running red hot. Attend an open for inspection or partake in an auction, and you’ll see some very hungry buyers.

Lack of stock is no longer the issue it was though, and the increasing number of properties that are coming onto the market will go some ways to satiating the extraordinary levels of pent up demand.

Given the tumultuous 4 years we’ve just experienced, nobody in their right mind would want to put predictions in writing. But, what I would say is this:

The pace of price growth we’re seeing cannot last; normalcy (the condition we all crave in so many parts of our lives) will return to the market to some degree; and, moving forward, trends will likely vary significantly between different property segments.

If you’re looking to buy or sell in the coming months – monitor local results very closely; get the best professional advice you can; and, try to keep a cool head.

A final note to those already concerned about a ‘housing bubble’: house prices aren’t yet back to their previous peak in about 1 in 3 suburbs across Melbourne; and, in about 1 in 3 outer suburbs, prices are only marginally higher than they were in late 2017 / early 2018.

The pace of change we’re seeing in such a short period is extraordinary, but the price highs are not.