Why is the Melbourne property market booming?

The Melbourne property market has now recorded eight consecutive weeks of auction clearance rates above 80%.

So what’s behind the boom? According to property experts, it’s all about confidence.

Adrian Jones, president of the Real Estate Industry of Victoria, says Melbourne is out-performing Sydney due to the fact prices in the Harbour City rose so high during the boom.

“I think Sydney was, dare I say, a bit more professionally arrogant in the boom, and prices went up enormously. They have come back down, and now the city is taking longer to recover.”

“Confidence levels are important as well. Buyers in Melbourne have regained confidence quicker than in Sydney. Melbourne is doing better, people are moving into Melbourne, the affordability levels are more attractive here and our economy, while not going gangbusters, is performing better than Sydney’s.”

Melbourne recorded an 82% clearance rate over the weekend, with 240 properties sold, totalling $139.6 million.

In Sydney, the city recorded a 64% clearance rate, down from recent results in the high 70s. The city recorded 109 properties sold, totalling $78.4 million.

Brisbane recorded a 28% clearance rate with seven properties sold, totalling $1.6 million, while Adelaide recorded a 27% rate with just four properties going under the hammer.

Matthew Bell, senior economist for Australian Property Monitors, agrees that Sydney housing prices have been relatively overpriced for some time, and says Melbourne is now entering a recovery stage.

“It’s also an historical thing. Melbourne has had a very strong auction culture and has always recorded strong auction results comparable to Sydney and Brisbane. Additionally, I think the property market wasn’t seen as overpriced as the Sydney market, so it hasn’t had a flattened falling period since 2003-04, so people see Melbourne as more of a typical market.”

“In terms of a recovery, I don’t think you can go too much higher than the 80% range in terms of auction clearance rates, but I suspect the market is on a steady recovery mode. I think prices are going to be flat or steadily rising until it strengthens until 2010, but all the data we’ve been looking at show prices at the upper ends have been positive.”

Bell also says Melbourne and Sydney are the two markets to watch for a property recovery, as they were “hit hardest” by the downturn.

“Melbourne and Sydney will lead the country out of the recession, based on the fact they’re exposed more to the sectors that were hit earliest, such as the finance sector. In terms of employment they’ll take a hit, but as hiring freezes begin to thaw then these properties will recover.”