The Melbourne property market has tightened. According to the REIV, the median house price for the March quarter was $565,000, down 6% from the December quarter ($601,000).

REIV CEO Enzo Raimondo said, “it is evident that the current residential market in Melbourne and Victoria has entered into a different phase of lower transaction numbers and reduced price growth. This is due mainly to affordability constraints, affected by the seven rate rises since December 2009 and particularly following the November interest rate increase. It must also be noted that most years the median price does reduce in the March quarter due to the lower activity in January.

“For the medium term the residential market has entered into a period of lower transaction numbers and lower price growth, and we are not going to see a repeat of the 20 per cent increase seen in 2010. The key to how the market performs in 2011 and beyond will depend on the strength of the local economy; at this stage, the fundamentals are still strong, especially population growth, employment and consumer confidence.

“Melbourne remains the second-least-affordable city in which to buy a home and buyers are being more cautious, as highlighted by the overall number of transactions falling by 18 per cent compared to this quarter last year. There are also about 37 per cent fewer first home buyers active in the market than this time last year.

“The median price of a unit or apartment was more stable, with a 4.2 per cent drop in the quarter from $480,000 to $460,000. Melbourne also has recorded its first suburb with a median price of a unit or apartment over a million in Brighton, where it reached $1,060,500.” Mr Raimondo said.

While the media will report that the property bubble is bursting, don’t be too alarmed by the adjustment. Many Melbourne suburbs peaked in April 2010 and the heat has since gone out of the market with overall less sellers and buyers committing to transact. Good property continues to perform well, and there are still plenty of opportunities to buy well, so ensure you have done your homework and don’t overpay.

Antony Bucello (National Property Buyers)