Melbourne property prices fall 2%

Melbourne's median house price has fallen two per cent in the first two months of 2008, as rising interest rates and sharemarket woes slow property market growth.

Real estate monitoring group Residex says the city's median house value has fallen to $469,000 after six months of interrupted growth that culminated in prices reaching a record high of $480,000 in December 2007.

"You can't have all the interest rate movements like we've had that quickly and a sharemarket that's crumbling like it is where there's not going to be some pressure on the housing market," Residex chief executive John Edwards told The Sunday Age.

According to Residex falling house prices were seen across all socio-economic areas, not just at the market's bottom end. House prices in Patterson Lakes fell by 1.6 per cent, in St Kilda by 1.45% and in North Melbourne by 1.38 per cent.

Some suburbs continued to perform well with house prices rising 2.6 per cent in Caulfield East, 2.59 per cent in Ashwood and 2.56 per cent in Malvern since February, despite the overall market slowing.

Separately the paper reports that Melbourne's clearance rate has dropped four percentage points on the pre-Easter weekend to 63 per cent.

The Real Estate Institute of Victoria said that the Melbourne property market was experiencing a "clear lessening" in demand for residential property and that further interest rate hikes could reduce demand even further, the paper reports.

"Clearance rates are likely to hover in the 60 per cent range for quite a few months yet, but that's on the basis that nothing further exacerbates the market, like even more interest rate hikes," REIV chief executive Enzo Raimondo said.