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While Melbourne’s residential market has recovered from the effects of the global financial crisis, 2010 is shaping up to be an interesting year.

Let’s consider factors influencing activity and prices. To date, we have had six interest-rate increases. We have an increasing population; there is a shortage of dwellings for them and the vacancy rate has been below 2 per cent for the past five years.In July there were 2959 auctions, with a clearance rate of 67.5 per cent for the month; in June there were 3203 auctions with a clearance rate of 68 per cent.

The strongest demand is in the suburbs, with prices at or below the median ($559,500), such as Watsonia, Ferntree Gully, Macleod and Dandenong.

In the higher-priced east and south-eastern suburbs, activity has softened. But with about 700 auctions scheduled for after the federal election, this may be seasonal.

A record total of $18.8 billion has been transacted so far this year; in 2009 it was $13.5 billion and in 2008 it was $13.1 billion.

So, while clearance rates and private sale numbers will fluctuate for various reasons, property prices are still increasing. So, are we in a housing bubble?

If you consider the influencing factors, it is difficult to see any real drop in property prices other than through another economic crisis.

Source: Domain.com.au

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