Aussie News : Victorian property values plummet $40 billion in six months

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Victorian property values plummet $40 billion in six months

By Karen CollierHerald SunJanuary 07, 2009 02:23am+-PrintEmailShare

VICTORIAN property values have plummeted about $40 billion in the past six months.

Melbourne's median house price of $450,000 mid-2008 is now down to $427,500, according to estimates, the Herald Sun reports.

And house price expectations across Australia have sunk to an all-time low, a new report says.

Victoria's $800 billion residential property market has dropped 5 per cent - or $40 billion - overall since July, according to BIS Shrapnel calculations prepared for the Herald Sun.

The trend has opened the door for potential borrowers desperate for cheaper housing.

The latest Mortgage and Finance Association of Australia/BankWest Home Finance Index shows almost two in three Victorians expect the value of their biggest asset to erode in the first three months of this year.

"The expected decline in prices will help address the chronic problem of housing being unaffordable for a lot of Australians, and first-time buyers are likely to be enticed back into the market," MFAA chief Phil Naylor said.

Recent Real Estate Institute of Victoria sales results show the volatile economic climate is producing winners and losers.

Expensive suburbs such as Albert Park and Armadale recorded price drops of at least 30 per cent in the three months from June.

However, other suburbs, including Fitzroy and Beaconsfield, jumped 20 per cent.

BIS Shrapnel senior economist Jason Anderson said the spectacular credit crunch price crashes witnessed in the United States would not happen here because Australia had a housing shortage and tenants hoping to escape the rent trap.

The research company predicts Melbourne's median house price will rebound 4 per cent during 2009-10. The median value is tipped to increase 9 per cent in the three years to June 2011.

Experts say Melbourne's northern and western suburbs will be among the best performers as new buyers seek affordable areas.

The MFAA's survey of 773 people predicted a home-loan resurgence in most states as interest rate cuts and more generous first-home buyer grants enticed borrowers.

However, the number of Victorians seeking a mortgage dipped over the past six months.