The past 12 months mark one of the state’s strongest residential property markets we have seen in recent years. More homes went to auction than ever before with multiple records falling, including the highest number of auctions held in a single day, weekend and year. High transaction volumes, low interest rates and buyer and vendor confidence all contributed to strong capital growth. As the year draws to a close, it is timely to review the market in 2015 and the outlook for Victoria in 2016.

Transactions & Auction Volumes

Transaction volumes in Victoria have been at their highest in five years with around 116,000 sales in the year to November 30. This is a five per cent increase on last year when there were 110,400 transactions.

In the year to November 30, around 40,000 auctions have been held with almost 30,000 homes selling under the hammer. Just over 37,000 of those auctions were held in Melbourne, compared to 2,500 in regional Victoria where private sales are more popular.

The key to the 2015 market has been auction levels, which have hit an all-time high in recent months. In the last weekend in November, multiple national auction records fell including most auctions in a single day with 1,648 auctions held  - 22 more than the previous record which was set in October last year. November 2015 was also a record month for auctions with 5,669 auctions held – 259 more auctions than the previous record month (November 2014).

Median Price Growth

Significant house price growth has been recorded in metropolitan Melbourne throughout 2015 with the median surpassing the $700,000 barrier for the first time ever in the September quarter. Growth has been widespread across the city, with price increases recorded in all three regions – inner, middle and outer.

Growth has been consistent during the year. In the first quarter of 2015, the median house price topped $671,000, up from $664,500 in December 2014. Suburbs in the city’s south east experienced the highest growth in the first three months of the year with Mount Waverley, Bentleigh and Beaumaris all up more than 16 per cent on 2014 figures.

Solid price growth continued in the June quarter with metropolitan Melbourne’s median house price almost reaching $700,000, at $698,000. Melbourne’s eastern suburbs recorded the highest median house price growth in the quarter with Templestowe, Glen Waverley and Balwyn North all rising by at least 17 per cent.

The September quarter saw the city’s median house price rise 4.5 per cent to a record high $729,500. Bayside suburbs Brighton, Dromana and Seaford topped the highest growth suburbs in the third quarter of the year, up more than 17 per cent on June quarter figures.

House prices have also increased in regional Victoria over the year with the median house price hitting $347,000 in the three months to September 30. This was up from $341,000 in the first quarter of 2015.

Million Dollar Suburbs

Buyer demand in traditional million dollar suburbs has pushed up the median house price in neighbouring areas. As a result of the ripple effect, more of these suburbs have joined the million-dollar club this year. There were 61 suburbs valued at $1 million or more in the March quarter, and this has since increased to 87 in the September quarter. Toorak remains Melbourne’s most expensive suburb with a median house price of almost $4 million. This is followed by Canterbury and Balwyn with median house prices of $2,430,500 and $2,281,000 respectively.

Looking Ahead

While clearance rates moderated slightly in November, they have still been strong given the record auction levels – and continuing high auction numbers to late 2015 indicates a high level of vendor confidence.

The mix of population increases, a robust economy and relatively low interest rates is likely to also encourage buyer interest moving forward.  

Across Melbourne, the market is likely to remain steady, with solid growth in a range of areas across the city. This growth is likely to be strongest in Melbourne’s inner and middle suburbs, which have seen strong buyer interest in recent months.

While this growth may not be as strong as what has been experienced this year – with up to five per cent increases per quarter – a city-wide population upturn and low interest rates both signal consistent buyer demand in the first quarter, and into the second quarter, of the new year.