Housing affordability declining as house prices surge

The large migration wave to Australia is responsible for surging house prices in Melbourne, according to a Greek ‘Property Professor.’

The average Melbourne house price has risen to a record $480,000 in the September quarter-a $30,000 rise over the previous three months.

“Just like many Greeks came to Australia in the 50s and 60s and created a huge demand for property, we are seeing that again right now with Indians, and migrants from South Africa,” says Peter Koulizos, lecturer and author of the book, The Property Professor’s Top Australian Suburbs.

“Except unlike the Greek and Italians who didn’t come over with much money, these migrants are white collar workers and international students that have the money which is in turn forcing up the price of house prices.”

Real Estate Institute of Victoria Spokesperson (REIV), Robert Larocca agrees. “There is an increasing population of 1700 people a week arriving into Melbourne, which is a road of confidence, however creates pressure in the property market as these people need somewhere to live,” he says.

According to the REIV report, Surrey Hills enjoyed the largest median increase - up 24.6 per cent, from $905,000 to $1,127,500.

Pascoe Vale was second best performer for the quarter with a 23.7 per cent jump from $485,000 to $600,000.

Sam Mourtzas, 37, who has been looking to buy a house near Docklands says surging prices has prolonged his search.

“Fiscal stimulus and interest rate cuts pushed prices in 2009 beyond justified levels making it difficult for first home buyers or investors like myself to make a move on the property market,” he says.

“With demand increasing, property is becoming scarce and people are willing to pay extraordinary amounts for half a block.”

A deterioration in housing affordability was evident in the latest HIA-CBA First Home Buyer Affordability Report, which showed a decline of 3.3 per cent in the September 2009 quarter.

Despite increasing interest rates and the rapidly looming deadline of the First Home Owners Grant, Koulizos underscores that now is a good time to invest.

“Buying property is like moving up an escalator- if you do not get on, then you don’t have the opportunity to move into a nicer property as the value of your first property grows.”

He adds that it is advantageous to buy a smaller property closer to the city rather than a larger property further away.

“If are looking to make money in property, it doesn’t matter how old the building is, you can change it. Location is the most important factor and the land you own.”

Published last year, Koulizos’s book, Top Australian Suburbs advises investors which suburbs across Melbourne have the best capital growth potential over the next 20 years.

Based upon affordability and value, here are Koulizos's
current top picks:

Braybrook. Median house price: 340,000-10km west of
CBD.