The latest “official” figures on Melbourne property prices observe that prices have dropped 4.9% over the last 12 months (Corelogic/RPData). On average, this might be true. But this overlooks that areas of Melbourne have dropped by significantly more than this. Prices in Burwood and surrounding suburbs were typically selling for $2,000+ per m2 at the peak of the boom. They now sell for $1600 to $1700 per m2. Sometimes quite a bit less if the location is not A grade.
So, the debate about whether prices will fall 15% or 20% from peak to bottom look almost amusing in the light of the reality on the ground. Agents in this general area are currently wishing this was truly the worst of it. Now this is not reflective of the whole of Melbourne of course. But given that the cause for the incredible growth in this region of the middle suburbs in the East is the buyer demand from Asian purchasers and investors over the last 20 years, the major correction can’t be totally surprising.
The attraction of the triangle from Balwyn to Doncaster to Glen Waverley to Chinese buyers in particular, means that when they withdraw, the impact is dramatic. Combine this with the much talked about tightening of lending criteria and the price drop has been quite sudden and severe. The Perfect Storm.
Any excesses get cleaned out with a correction and the current pain is simply Economics 101. Once the dust settles a little and fear starts to recede, the cycle will start over again. Hopefully without the same extremes but demand will return. Just a matter of time.