Anyone who ventured outside yesterday for a nice autumn picnic would realise winter is already here. BUT NOBODY HAS TOLD THE PROPERTY MARKET. Saturday saw over 1000 auctions with a clearance rate, according to the REIV, of 79%. Whilst there will not be any significant auctions next week due to ANZAC day, I would assume we will see over 1000 auctions on some of the weeks during May. And clearance rates will not be dropping any time soon.
Traditionally the market slows in April, cools down in May and hibernates through June and July. Anyone thinking this year will be similar will most likely be paying a lot more for the properties they missed out on during winter. It is often much harder to find what you want during the colder months, as stock levels can be low. However, when you find the right property, quite often, there are not as many prospective purchasers around. As an expert negotiator, I usually buy more property for my clients in May, June and July than in December, January February. And this year looks like we will have a lot more stock, at least throughout May.
The talk of the property price bubble has hit the papers again. A price bubble occurs when unsustainable growth occurs in a short period of time leading to a market balancing effect (a price fall). For this to occur, there needs to be unsustainable growth. We are not even close to being at long term average growth at the moment. Over the last 5 years the Melbourne median has only moved around 6% p.a. whereas the average is closer to 8%. If we look at the more affluent suburbs we can see very exact changes. Camberwell according to the Realestate.com.au website has had nearly 8% growth over the past 10 years yet over the past 5 it has only achieved 4.11%. And this is similar for many other suburbs both above $1M median and below.
We are not even achieving average growth, so the possibility of a price bubble in property is extremely low. But we will hear the academics telling us about our property prices being the most expensive in the world. They will compare Australian wages vs property price growth. Unfortunately they do not take into account that we are becoming a global society and many people earn income overseas and yet choose to buy property in Australasia. And I am not just talking about foreign nationals. They also do not take into account that many people have made a lot of money on property price growth and when they sell and buy a slightly more expensive property, their mortgage doesn’t go up all that much.
But the single biggest factor is that Buying close to the Melbourne CBD – within say 5-7km’s is ridiculously cheap compared to New York, London or Shanghai. A 1 bedroom, 100sqm apartment is asking $2.6m in Manhattan. In London a 1 bedroom in a new complex is asking £750,000. And in Melbourne we can purchase 100sqm of luxury apartment for about $800,000 inside the CBD. We are nowhere near over priced.
If you are considering a property purchase this year, think about having a chat with us. We can assist you with property negotiation, searching and assessment.
Ian James
Director JPP Buyer Advocates
