Again the market moved up sharply this week and moved back over the 1000 sales mark. This is the fourth time since March this has occurred. And again the drop in clearance rates is virtually meaningless. Next weekend is virtually a non event for auctions due to the AFL Grand Final; it will be interesting to see the number of private sales that still proceed.
For those of you perturbed about little things like the world economy, and such other trivial matters as stock market crashes and resurrections and what it will do to the Melbourne property market, you may have missed a small article quoting RP Data. They believe rental returns will increase by 14% over the next year. If this trend is continued for five years, a good $500k investment property returning average rent, in a good location, with average depreciation could easily be revenue neutral within about 5 years. If this occurred and the average trends of the last 25 years continued, you could have a property appreciating at better than 10% pa and the tenant is paying for the whole thing.
Add to this the supply vs. demand issue which is always the dominant influence on price movement. With building approvals not keeping pace with increases to our population, the price over the long term must rise. Add the fact that investors are returning to the stability of property and the possibility of being revenue neutral in a relatively short time frame, and you have the basis for excellent long term outlook in the Melbourne Residential property market.
Owner occupiers are starting to consider their position in the market as well. As investors continue to come back to the market, this will put a lot of pressure on the first home buyers especially.
Prices will begin to climb, slowly at first; the spring selling season is upon us and the total number of sales is rising. By February or March next year, with perhaps one or two interest rate reductions and the prospects of revenue neutral properties even closer at hand, property prices in Melbourne have nowhere to go but up.
Ian James
