Victoria housing market poised for slow and steady long-term growth on solid economic fundamentals

MELBOURNE: Victoria's residential market is poised to enjoy long-term, albeit slow, growth on strong economic fundamentals, said international real estate service provider CB Richard Ellis (CBRE).

"Strong outlooks for jobs growth, housing construction, housing finance and building approvals place the state in a relatively stable environment for future growth," it said in its fourth quarter MarketView report covering the area's housing markets.

The consultancy said based on key indicators, the market is in good stead for the period towards the end of 2010 and into 2011.

"Economic fundamentals for Victoria should therefore provide the basis for longer term growth, but at present, the markets are undoubtedly in the leveling period despite good 12-month growth and increasing interest rates will continue to slow the market," it said.

However, CBRE noted that the effects of the positive economic fundamentals have begun to wear off over the last three months as market activity is showing signs of softening despite a seasonal increase in inquiries, according to agents and valuers.

For instance, auction clearance rates presently hover around the range of 60 % to 70%, possibly due to the absence of the first home owners grant, uncertainties following the outcome of the Federal Elections and higher interest rates, said CBRE.

"Perhaps the biggest factor is that Melbourne has been experiencing such strong price growth that a slowdown was inevitable," it added.

Nonetheless, the state's residential market has been leading in terms of price and value growth for the nine months ended September, despite quarterly results and anecdotal evidence suggesting a leveling market.

CBRE found that residences under A$500,000 (RM1.52 million) continued to perform well in a market dominated by first home buyers and investors while higher priced properties in the US$500,000 to US$1 million (RM1.58 million to RM3.15 million) and premium real estate priced over US$2.5 million have seen slower growth.

It added that the residential market's future gains could largely be derived from business confidence, where it currently enjoys business spending at a relatively higher proportion than other states nationally.

"The Victorian residential market will need this spending to continue to distance itself from the general slowdown that appears to be occurring throughout most residential markets in Australia," it said.