Oliver Hume

There is no disputing that Melbourne has been subject to record levels of off-the-plan activity in recent years: more than 370 projects, containing some 35,000 apartments have been released over the last two-and-half to three years.

But some positive signs are starting to emerge suggesting that we may avoid the bumpy landing these numbers imply.

According to the Australian Bureau of Statistics (ABS), Australia’s population has risen by around 383,000 persons or 1.7 per cent over the 12 months to September 2012. The quarterly increase of around 102,000 was the highest since June 2009.

Victoria added around 95,000 persons over the same 12 months: more than any other state. It added around 25,500 persons in the September quarter alone: once again the largest growth of all states.

Australia’s population has risen by around 383,000 persons or 1.7 per cent over the 12 months to September 2012. The quarterly increase was the highest since June 2009.  The mining states of Western Australia, Northern Territory and Queensland experienced the strongest growth.

Queensland added around 91,400 persons over the 12 months to September quarter 2012 (growth of 2 per cent, second to Western Australia in percentage terms); and just over 24,500 in the September quarter alone.

Net overseas migration is the major contributor to population growth: driven in part by an uptrend in the number of tertiary students.

Victoria’s population is growing more quickly again; adding around 89,000 persons over the 12 months to June 2012 (compared to around 77,000 in the previous calendar year). Historically about 80 per cent of this extra population settles in Melbourne.

Consumer confidence is on the rise. In February 2013, the index rose by seven per cent, moving above the ten year average for the first time in two years.

Levels of construction are also relatively strong in the apartment sector, with around 60 per cent of all projects under construction: more than 60 per cent when projects released over the last six months are discounted.

It is conceivable that after eight consecutive quarters of falling prices, we may be close to the bottom of the current cycle.

Prices peaked in the December quarter 2010 at $225,750: after increasing by around 25 per cent over the preceding 12 months and a further 8 per cent the previous 12 months.

Since the December quarter 2010, net prices have fallen by around 16 per cent.

Although many analysts suggest that Melbourne house prices will rise in the year ahead.  Few would suggest that we are in for a period where growth-area land prices may start to climb.  There are nevertheless several indicators suggesting the down-side risk is no longer greater than the upside potential.

The South East Queensland land market is displaying further signs that the worst may be behind it with another quarterly rise in the median land price.

Albeit marginal, prices are importantly moving in the right direction.  The median land price is now $234,000. 

This is now the third consecutive quarter that land prices have lifted. With downward land price movement in a number of capital city  markets, the region is now the second most expensive land market in the country behind Sydney.

Leading indicators suggest that growth in the economies of our major trading partners will slow to below trend rates in the six months ahead.  

Recent forecasts by the International Monetary Fund (IMF) confirm that world growth in 2012 is likely to have slowed markedly: from 3.8 per cent in 2011 to 3.3 per cent this year, with slowdowns in both the advanced and developing economies.

Despite the troubled world economy, Treasury’s latest forecasts see the Australian economy growing by 3 per cent, both this year and next. They see no growth in private investment in dwellings (real spending on new housing and housing renovations) this year, but growth of 4 per cent in 2013/14.

For the second consecutive quarter, the net effective land price sits below the $200,000 mark. 

Since peaking in the December quarter 2010, around $30,000 has been sliced off the median price in the form of reductions, rebates and incentives.

It is the seventh consecutive quarter that land prices have fallen. 

Perhaps now is the time to question what would be the psychological effect on the retail market if these rebates and incentives were removed: many key stakeholders believe that such an action would reinstall much needed buyer confidence.

In the June quarter of 2012 the trend in national dwelling approvals rose by 8 per cent to an annual rate of 150,000.  The trend in approvals of houses continued to decline.  Multi-unit approvals, however, surged by 28 per cent to an annual rate of 63,300.

The main cause of this surge was a big increase in approvals of high-rise apartments in Victoria, which more than doubled from 2,150 to 4,410.