Relief as Melbourne's median house price jumps to $545000 - Herald Sun

Handing Over the House Keys in Front of a Beautiful New Home. Thinkstock Source: Supplied

MELBOURNE'S median house price leapt 4 per cent in the past financial year on the back of record low interest rates.

At the end of June, the median price in Melbourne was $545,000.

It created some relief for homeowners who saw property values fall by a median 7 per cent in the 2011-12 financial year.

But in a bleak outlook to be released today, BIS Shrapnel said price growth in the next three years would be at 5 per cent.

This will be among the lowest rises in the nation as the slowing Victorian economy and an oversupply of new houses and apartments keep a lid on growth.

And this could see any gains stripped away by rising cost of living. "After accounting for inflation, prices are actually forecast to fall by 4 per cent in real terms," study author Angie Zigomanis said.

In the same period, the Sydney market is expected to rocket ahead 19 per cent, Brisbane 17 per cent and Perth 15 per cent.

"Further growth in Melbourne's median house price is likely to be muted given the lack of pent-up demand and weakness in the state economy," Mr Zigomanis said.

"Nevertheless, with interest rates at their current low levels, and with the prospect for further easing in rates in 2013, there should be enough to edge prices up despite these negative factors."

Mr Zigomanis said the nation's record low interest rates played a role in the rising values over the past financial year.

Since June last year, the Reserve Bank head, Glenn Stevens, has slashed rates by 0.75 percentage points to 2.75 per cent in a bid to prop up the economy as the mining boom fades.

Mr Zigomanis said price growth in the past year was concentrated in inner and middle-ring suburbs, where the population had been less exposed to the weaker sectors of the economy.

"Record levels of new dwelling construction from 2009-10 and continued strong supply of apartments have meant that supply is exceeding underlying demand and should result in vacancy rates rising," he said, adding "growth drivers for the state economy are subdued".

jeff.whalley@news.com.au