One would not naturally expect this result in the country's fastest growing state (by population). I've previously discussed the reasons driving this relative underperformance in Victoria, which boil down to: • High property taxes • Higher (historic) new housing supply • General bureaucratic and economic malaise
It's not due to "high" interest rates; if rates were the primary reason you would not have seen rapid growth in Perth, Adelaide and SEQ over the same period.
It's worth remembering that these drops are relatively small and can easily be swamped by rapid increases within a short space of time.
The thing I want to dwell on in the data is median unit prices – which range from $480k in Melbourne's West, up to $670k in the Inner East. Up 0.8% on average across the year.
Why are these important? Well, these are a proxy for the price the market expects to pay for a new unit, for which the median is likely to be a 2 bedroom apartment.
Compare those prices with the replacement cost a developer needs to charge for a new apartment in these same areas and there is a 40-50% gap. Think a new 2 bedroom unit needing to approach $1.0m.
Buyers should pay more for a new dwelling than an old one, just like a new car costs more than a used one. But until that gap shrinks – closer to 20% or 25% – apartment sales will be fraught and new projects won't get built.
On the flip side, those median house prices – even if lower than they were – still compare very favourably to a new #greenfield House & Land Package or larger townhomes in middle-ring areas. So demand will pick up in such projects much sooner than for other forms of housing.
It again demonstrates why a dogged focus on apartment development as being the solution to #housingsupply is so fraught. It's all in the numbers.