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A title we could do without

Chris Vedelago

November 1, 2010 - 11:11AM

Houses in Melbourne are now less affordable than Sydney.

In the traditional rivalry between Melbourne and Sydney, the harbour city has long held the dubious distinction of being the most unaffordable place to find a home. But not any more.

New research from analysts Residex shows that Melburnians now spend more of their income to buy a home than anywhere else in the country.

Comparing median house values to the average household weekly earnings in both cities, Residex found Melburnians now devote 65.49 per cent of their take home pay to mortgage repayments compared to 64.44 per cent for Sydneysiders.
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The trends holds true in the apartment market as well, with Melburnians spending 49.63 per cent of their income to buy a unit and Sydneysiders paying 45.44 per cent.

‘‘For the first time ever, Melbourne has become the most unaffordable city in Australia,’’ Residex chief executive John Edwards said.

‘‘Wage growth between the two cities has been similar, but wages are still lower in Melbourne. While the median value for a house in Melbourne is $592,000 compared to $663,000 in Sydney, Melbourne house values have shot up at a rate which is significantly higher than in Sydney.

‘‘That means a typical family in Melbourne now has less to spend after making home loan repayments than a typical family in Sydney.’’

Residex forecasts that worsening affordability constraints - compounded by future interest rate rises - will limit price growth to a level just above inflation (4.01 per cent) over the next five years.

Meanwhile, the auction market experienced its traditional lull for the racing festivities, with just 343 auctions taking place around the city yesterday. The clearance rate was 67 per cent, according to the Real Estate Institute of Victoria.

In Footscray, a torrential downpour didn’t dampen the enthusiasm for 9 Talbot Street, a two-bedroom Victorian cottage that sold for $650,000 off a reserve of $620,000. Niels Geraerts of Barry Plant Yarraville said two first home buyers went back and forth from an opening at $570,000. It was quoted at $600,000-plus.

Two bidders were also responsible for pushing 4/2-4 Faulkner Street in Bentleigh to a sale under the hammer. The three-bedroom, three-storey townhouse sold for $575,000 after hitting its reserve at $560,000. It was quoted at $530,000 to $570,000.

‘‘We did four auctions [yesterday] and all sold in what were really wet conditions. Small crowds, but with a couple of bidders at each [auction],’’ said Michael Egan of Century 21 in Bentleigh. ‘‘The serious buyers come out to play whatever the weather is.’’

Nevertheless, the auction of 44 Wheatley Road inMcKinnon ended with a pass in, despite competition between two parties, according to Catherine Cashmore of JPP Buyer Advocates.

The two-bedroom 1920s house opened at $700,000 and hit $770,000 but the bidding faltered after a break was taken to consult the vendor and it was announced the property was still not on the market.

Quoted at $700,000 to $770,000, it sold through later negotiation for $780,000.

In other news, the Brumby government has promised to institute a legal ban on so-called ‘‘price plus’’ quoting in real estate advertisements and sales campaigns if the Labor Party wins the state election.

The prohibition is expected to prevent the use of about 20 different price representation methods - such as ‘‘$500,000-plus’’, ‘‘$500,000+’’, and ‘‘in excess of $500,000’’ - that have long
been deemed misleading by Consumer Affairs Victoria.

CAV issued a series of guidelines about three years ago that restricted agents to advertising a property for sale using a single price or a price range, but they have been routinely ignored because they lack the force of law.

But industry critics argue that the proposed ‘‘price plus’’ ban will do nothing to halt the widespread practice of ‘‘low ball’’ underquoting.

This in where agents allegedly underestimate the likely value of a property on sales documents in order to quote this lower price during the advertising campaign without technically
breaching underquoting laws.

Looking ahead, there are 650 auctions scheduled next weekend.

Call Market Wrap with your auction results, tips and comments on 8667 2647 between 3pm and 6pm on Saturday.