With the autumn selling season just beginning to build up for the first of the big auction weekends, we can already see that the competition for properties this year will be stronger than that of last year. The clearance rate across the weekend is basically meaningless. With only 250 auctions gazetted for the weekend and only 107 reported to be sold on the day, there is nowhere near enough data to interpret any valuable insight. 67 of the 250 auctions have an unknown result.
What we can take from the first two weeks of the season is the fact that open houses are full. Queuing to get into townhouses on Saturday brought back memories of 2007 and 2009. In talking with agents through the week and on Saturday, almost all said their enquires on all levels of property, from first home buying 1 bed apartments to prestige, multi-million dollar homes, has increased dramatically. Up, even on Christmas numbers last year.
Further anecdotal evidence of increased activity this year is our own enquiry levels. They are back to 2009 levels, which whilst not a record year, was still very good. The interest has been across the board. Investors are looking for properties that have excellent growth prospects but have a reasonable depreciation deduction that will allow them to be close to revenue neutral from very early on in the investment. With official cash rates at 3.00% (borrowing capable in the early 5%), investors that have a high income and high level of tax can buy properties with approx. 10% deposit and be revenue neutral from day one.
First home buyers who now get a 30% discount on stamp duty and who have been saving for years are now entering the fray. But the big influx and the segment that will have the most impact is the upsizers and downsizers. These people have been sitting on their hands for the past two years. Anyone who has owned a home and been waiting to “trade-in” has been reading the gloom and doom in the media since April 2010 and not selling unless they have to. Well they have to!! Nobody who wants to upsize or downsize can wait forever. And this year will start as a trickle but finish with a flood.
Turnover will slowly ramp up through to May and June, and I believe there will be reasonable prices, for both the buyer and the seller. But it will be November and December this year that prices will really pick up. We will have an outcome for the Federal election, we will be one year further away from the GFC version 2 and we will have 12 months of US catch up under our belts. All in all, assuming there is no GFC version 3, I think the Melbourne property market will get back to normal. Normal for the Melbourne property market over the last 30 years means we will see average median growth over the top third of suburbs in Melbourne climb back to 9% p.a.
I believe we are in for a sluggish start to the year, but it will gain solid momentum and price growth in the closing stages of this year will be strong.
If you are interested in buying a residential property in Melbourne, I would strongly advise that you get some assistance. Just remember, the vendor is paying a substantial amount of money for advice from a professional real estate agent. If you are buying and want to be on a level playing field, you should be hiring a professional real estate agent as well.
Ian James
Director
JPP Buyer Advocates
