Market Comment – Monday 20th September 2010

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The world keeps ticking along at quite a pace. Clearance rates over 70%, whilst not as high as last year, still offer solace for most vendors. Only 4 properties short of the 1000 total sales for the week (REIV reported a total of 996 sales last week) and with the AFL grand final stopping most real estate transactions for a week, I think we will be in for an interesting spring season.

Most agents are reporting dwindling stocks in the top end (over $1M) but the levels for $400k – $700k, the market of choice for savvy investors who want to make money, are beginning to pick up a little; so say the selling agents. If this comes to fruition, prices should only grow slightly coming into Christmas, before another pick up in February 2011.

Where is the Aussie dollar going and what does it mean to the property market? Our interest rates, whilst historically low, are extremely high by world standards. Our wealth is not based on financial markets like Japan or Great Britain, but on tangible resources that we can sell to emerging giants like China and India. The massive US economy is slowly awakening again, and people are beginning to take money out of US Bonds, always seen as the safest place to park sovereign capital and begin to invest around the world. Much of that capital is going to land on our shores.

The Aussie dollar will soon reach parity with the Greenback and may well surpass it, and whilst this is great if you wish to take an overseas trip or buy imported goods, it is not fantastic for our exporters. And currency is an incredibly volatile medium. It can move massive amounts solely on confidence.

Tourism will also play a huge role in Australia’s economic growth. One Chinese airline has announced massive increases in the number of trips from China to Sydney and Melbourne. Whilst the Japanese tourists are dwindling, it will be the Chinese middle class that will reinvigorate some of our regional tourist destinations.

With the growth in our economy almost assured, we need to look at what this will do tho the property market. There will be more wealth created through our economy than almost any time in recent memory. This will be channelled into both the stock market and the property market. Over the next 5-7 years I would predict the top third of suburbs in Melbourne will have doubled in value. This will not relate to the Melbourne median house price which is still largely bound to the “New Estate” areas as they grow. This is an area that we can foresee only a growth of around 5%-8%, or doubling in 10 – 12 years. Regional Victorian towns will continue to prosper at the 7% or so mark, but if the government starts to bring high speed transport to these centres, such as Geelong fast trains in 30 minutes not 60 minutes, and then opening up Ballarat, Shepparton, Mildura and Bendigo; we could foresee far greater capital growth in these centres.

If you are interested in purchasing property in Melbourne, either as an investment or to live in, please do not hesitate to contact us for a no obligation meeting.

Ian James

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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.