Melbourne is enjoying its biggest start to the year for auctions since 2008. Picture: Hamish Blair Source: Herald Sun
MELBOURNE'S housing market is back in business, with average values rising at a rate of almost $300 a day.
The median house is now worth $520,000 - up more than $8000 or 1.6 per cent in February - new figures reveal.
The growth has defied expectations prices would struggle for at least two more years.
It comes as Melbourne is enjoying its biggest start to a year for auctions since 2008, with the Real Estate Institute of Victoria revealing 3000 homes will go under the hammer before Easter.
Last week's clearance rates also hit 72 per cent, the highest since October 2010.
Economists have even more good news, tipping further strengthening in property prices and a rising stock market, with bargain fixed interest rates as low as 4.99 per cent fuelling demand.
RP Data/Rismark Home Value Index figures revealed the hefty gains in February and an average rise in house values of $120 a day across the past three months.
RP Data analyst Tim Lawless yesterday confirmed the growth was not a one-off.
The market had risen by about $20,000 (4 per cent) since it bottomed out in in May last year, Mr Lawless said.
Values remained an average of 6.9 per cent below their peak in 2010, and would need to grow that much before a total recovery would be declared, he added.
But the growth in the past six months had been exceptional, he said.
"A 2.2 per cent increase for the quarter is a surprisingly strong result," Mr Lawless said.
"We haven't seen consistent growth like that since September 2010."
Mr Lawless said prices would not take off but, after earlier predictions Melbourne would struggle in the face of a glut of new housing developments, he said the market had defied expectations.
"My view for Melbourne was that it would be a subdued market for longer than this," he said.
"It just seems that Melbourne is defying that speculation."
This weekend will be the busiest yet for auctions this year, with 970 listed, according to the Real Estate Institute of Victoria.
REIV spokesman Robert Larocca said: "Now we will just see if the market maintains this level over the coming month, as we have a lot of properties going for sale."
The increased confidence in the property market, combined with rising stock markets, makes a further rate cut unlikely when the Reserve Bank meets on Tuesday.
The futures market is now betting there is less than a 20 per cent chance rates will fall by 0.25 per cent to a record low of 2.75 per cent next week.
One more cut in the June-July period is still seen as a possibility, albeit a declining one.
Household confidence has clearly been boosted by the almost 20 per cent rise in the share market over the past six months.
And the major banks are all offering loans around the 5 per cent mark - helping tempt investors and even some new home buyers back into the market after an extended period on the sidelines.
"The fundamentals for housing remain solid and there may be light at the end of the tunnel," CommSec economist Savanth Sebastian said.
"The substantial cuts to interest rates, rising share markets, strong population growth and improving confidence levels will support activity over the medium term."
Since November 2011, the RBA has lowered the official cash rate by 1.75 percentage points, to the current rate of 3 per cent.
- with Stephen McMahon
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