Clearance rates slowly dropping

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Did anyone expect anything different from this year? Clearance rates in the 60’s but sales still consistently over 1000 per week according to the REIV. These numbers are down about 15% from the unsustainable levels of 2010 but only about 8% down on 2009. The difficult question to answer is what will this do to price?

On many occasions turnover numbers give a good indication of how strong the market will grow. With sales numbers down on the last two years, I can still foresee growth, but down from around 10% to be closer to 8% for the top third performing suburbs in Melbourne. As less people purchase property and the population continues to grow, tremendous pressure will be put on tenants paying rent. Whilst rental returns growth has slowed over the past couple of years, (mainly due to the rapid rise in purchase prices, not a slowing of increased rents if interest rates rise), and growth slows marginally, landlords will still be looking for return on investment. Pressure on fewer property purchasers means higher pressure on rental growth.

There are several reasons why the purchasers have become a little skittish this year. We have had a year like no other that I can remember. Natural disasters have hit both Australia and our region; there has been pressure on the global economic climate caused by the lingering effects of the GFC throughout the European community regarding sovereign debt issues. The Middle East has had its fair share of turmoil already this year, with potentially more to come. And then there is our nation’s leaders: I don’t think anyone is doubting that the “Greens” are holding a considerable amount of power in Canberra these days, not to mention the “three amigos”; the three independents. All of these factors lead to uncertainty. Uncertainty will always affect our property market.

As far as the natural disasters are concerned, the amount of rebuilding needed both here and abroad, will actually stimulate our economy in the short to medium term. This will lead to labour shortages and wages growth. Western Australia is already starting a huge advertising campaign to bring in skilled migrants. If there is enough pressure in this area, the Reserve Bank may put interest rates up again. And if we increase our labour market by allowing immigration to increase, which we will have to do, we will have more trouble housing everyone.

The “price bubble” argument cannot be sustained whilst we have inordinate and necessary population growth. Even the biggest sceptics around would have to agree, that with our current and expected population growth, and our current levels of housing starts, there will continue to be a shortage of useable property for many years to come.

If you are considering a property purchase please feel free to call us for a chat.

Ian James

JPP Buyer Advocates

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About the author

Ian has been operating his own businesses for more than 25 years. During this time the self taught lessons of building the business, dealing with staff, suppliers, clients and economic woes have been invaluable. Ian is a fully licensed Real estate Agent, a member of the REIV and registered with the Business Licensing Authority.

Buying property is not just sticking up your hand and outbidding your rival. It is an emotional, fiscal and psychological decision that needs to be planned and well executed. Ian is usually involved in over three hundred property negotiations per year; ranging from the $250,000 first unit purchase for a young couple to multiple million dollar residential developments. Ian's business background and endless numbers of negotiations make him one of the industry's leading negotiators.

Ian is married with two adult children, living in Patterson Lakes. He is a keen fisherman when weather and business allows the time.

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