Surge in property values put house sellers in the box seat

Melbourne residential property values have surged at the fastest annual rate in more than six years – and owners of freestanding and semi-detached houses are chalking up the largest price gains.

Home values in Melbourne rose 15.9 per cent in the 12 months to April, and have gained further traction into 2017 with a boost of 1.9 per cent in March alone, according to new data from CoreLogic.

So far this year, Melbourne’s combined house and unit prices have grown faster with each month, as value increases across Australia’s combined capital cities also pick up speed.

March home values in the Victorian capital consolidated on a 1.5 per cent boost in February and 0.8 per cent in January, according to CoreLogic’s March Hedonic Home Value Index.

The median property value rose 4.2 per cent over the quarter to $605,000, but Melbourne’s independent houses on their own allotments are experiencing the most robust growth.

CoreLogic head of research Tim Lawless said a gap in performance between houses and units was a feature of property markets nationwide, particularly in Melbourne.

“The disparity in growth rates is more significant in those cities where high new unit supply is more apparent,” he said. “In Melbourne, house values were 17.2 per cent higher over the past 12 months compared with a 5.2 per cent increase across the unit sector.”

Real estate agents in inner Melbourne and the city’s northern suburbs are seeing sustained levels of upbeat demand for houses.

At many house auctions this year, five or six bidders have competed for the available houses. At auctions for units and apartments, it is more common to see two or three bidders.

Nelson Alexander Sales Director Arch Staver said homeowners who were evaluating whether to renovate an existing house or change over to a new property, needed to take stock of the high prices they could achieve by selling.

He said Nelson Alexander’s office network was seeing a trend to house owners, with builders’ plans prepared for a renovation, calling in an agent for an appraisal before starting the building works.

“A significant percentage of these property owners then decide to sell,” Mr Staver said.

“The cost of renovating is so extreme at the moment that some people are deciding it might just be easier to cop the stamp duty and the selling costs and move on to a new home.”

He said the market for independent houses, as opposed to townhouses or apartments, remained very strong.

“There will always be a preference to own a property that does not have to share amenities with an owners’ corporation,” Mr Staver noted.

“The level of independence that a free-standing or semi-detached house offers is highly valued by prospective buyers. That’s especially the case at the moment because there are shortages of certain types of houses.

“Any house on a single level, for example, is being hotly pursued in this market. Buyers are anxious to buy them.”

AMP Capital chief economist Shane Oliver said Victoria had a strongly performing economy and high levels of population growth.

He said any potential cooling of the real estate this year was most likely to be confined to the new unit market, and especially units in the CBD.

“If there is going to be an oversupply, it is going to be in units,” Dr Oliver said.

“There is certainly no oversupply in freestanding houses – they are still growing at a solid rate.”

Owner occupiers play a bigger role in the buying and selling of freestanding houses, compared to the unit market. This factor plays to the advantage of vendors who opt to list a house for sale.