How is this years market shaping up?

Print This Post Print This Post

The market in Melbourne is just beginning to come alive. Many selling agents are talking about bumper sales throughout January, and not enough new listings to keep up with demand. Whilst we saw the Reserve Bank maintain interest rates due to Australia’s excellent economic position, we witnessed big business begin to “cash in” The Real Estate Institute of Victoria issued the clearance rate for the 276 at 66%. But really with a sample this small you cannot read too much into this figure.

Two of the big four banks raised their standard variable rates (SVR). Westpac and ANZ increased their SVR by 0.1% and 0.06% respectively. Commonwealth and NAB may do the same this week. As far as these behemoth companies are concerned, the more we pay the more they will take. Most manufacturing businesses are reducing profits to keep afloat, most small businesses are keeping their doors open by cutting their own wages and retailers have been hit even harder. Although it is not only the banks gouging ever greater profits, the world economy is playing havoc here as well. The Australian Dollar at well over $1.06USD means all our exporters are struggling to compete with overseas markets.

What does this mean to house prices? We need to consider that the vast majority of people in Australia and especially Melbourne are employed and are actually paid very well. We can look at the fact there is a greater number of people being born than those that are dying and there is a greater number of people moving into Melbourne than are leaving. If we built enough homes to cover this population increase then property prices at the moment and in the short term would remain flat. However, we are not building enough homes to keep up with demand, let alone catch up with the shortfall. It means that in the medium term (approximately the next decade) you can safely assume that property prices in the top third performing suburbs in Melbourne will more than double their current value. We also know that Many Billions of Dollars are going to spent in Australia this year and for the next three years in the mining sectors. This money will flow back to individual Australians and they will spend a percentage of this on accommodation.

We can easily assume that rents will most likely increase by around 6% p.a. and therefore take a little over 10 years to double. Rental vacancy rates have grown last quarter, with the REIV saying that 4 out of every 100 properties are now awaiting tenants. The rental situation will be alleviated by further high density development over the next decade. There will be a lot more people looking for rentals and I believe they will become less fussy. They will live in smaller apartments in high rise and high density living environments.

To the average person who has been saving, potentially with a partner and are now in the market for their first home, or a family that is running out of room in their first home and are looking for something bigger, and have been waiting for the right time to buy: This year will probably be that time. Many people avoided getting into the market last year. Most companies offering housing statistics have all said the market was down almost a third in turnover last year. This would normally mean there will be an increase in turnover regardless of market forces (ie a catch-up on those that did not purchase last year)

Last week we talked about what property to choose, the week before about how to accurately assess the property you wish to buy. There are four main areas you need to think about when purchasing property. What to buy, where to buy and how to find it, what’s it worth and how do I negotiate with an experienced Real Estate Agent. I will talk about all these areas and break them down into great detail over the next few months. These articles will be written alongside my market comments. If you have specific questions about real estate please do not hesitate to leave a comment or email directly and I will endeavour to answer your questions.

Ian James
JPP Buyer Advocates

Share this Market Comment

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.