Market growth is easing

Print This Post Print This Post

The market is beginning to tread water. Coming into Easter we still have a huge amount of property on the market which has been slowly selling when the vendor meets the market. The REIV has issued the clearance rate at 61% but this will almost certainly drop into the 50’s when the 117 auctions with no result are tracked down and added to the clearance percentage.

The market is fragmenting. Over $1.5M is beginning to soften. There are many properties still on the market that have failed to sell at auction and seemingly, no shortage of vendors still happy to try their luck. Whilst the best properties are still selling with multiple bidders, the properties that are overpriced, or simply presented at their best, are struggling to sell. This leaves more supply than demand and vendors in greater difficulty than they have been in to sell for the past 6 months.

The $400 – $1M market is by far the strongest. This is the investors’ market place of choice. This segment has multiple bidders going after multiple properties. This is the strongest performing segment over the past decade and should hold the least risk for investors going into the next decade.

We have seen the Australian Bureau of Statistics come out with the population statistics for the year ending June 2010. For all the naysayers who believe the housing market is about to fall into a screaming heap and drop 40 – 60 per cent, just have a look at the population increase in Melbourne and the HIA is saying the building of residential property is slowing. Melbourne’s population has increased 605,000 people since 2001. This is the fastest growth in the country, and faster growth than any other time in history.

With the supply of dwellings falling and the population increasing, rents will go up, property prices will go up, and our children will find it hard to purchase their first home, anywhere but on the fringes of the CBD. It will be up to our state and federal governments to assist these people, however it will be up to market forces to determine what a 2 bedroom apartment 5 kms from the CBD will be worth in 10 years’ time. In my opinion it will be easily over $1M

We can talk about the US housing crisis, where their unemployment has taken a beating, where their home loans are “non-recourse” and where they built a ridiculous amount of homes and then sold them to people who could not afford them, but none of this has occurred in Australia, specifically Melbourne.

This is not like a carbon tax, where you can like it or not. You can believe it or not, you can vote for it, or as in our case you can not! This is market forces on an essential element of our natural lives. Breathing, eating and then shelter. It does not matter whether you rent or wish to buy, you need a roof over your and your families head.

Property prices will fluctuate over short periods of time, however over the long term we will continue to see property prices grow at approximately 7%-10% throughout Melbourne. The top third of suburbs will be at 9% – 10%

If you are considering purchasing property please do not hesitate to call us or drop in for a chat.

Ian James

Director

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.

Top