Market Comment – Monday 23rd August 2010

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There was a 75% clearance rate according to the REIV over the weekend. This was on very low stock levels due to the Federal Election. There were 550 private sales and 300 auctions last week. And over 10% of these auctions sold prior.

Neither vendors nor prospective purchasers should read anything special into the rise in clearance rate. Whilst it is nice to see the rise, it is on very low volume. We should see a rebound in volumes next week. This is not to indicate an upward trend, simply a balancing of numbers due to the Federal Election. The auction numbers are likely to begin there slow climb from winter levels into the spring frenzy. Apart from Grand Final day at the end of September and Melbourne Cup weekend, we should see turnover numbers breaching the 1000 per week mark.

Whilst the uncertainty of the Federal Election will probably concern the stock markets dramatically, the property market is usually far less volatile. Volumes may stay down a little as some investors may choose to see who will be running the country in a couple of weeks. However, neither party has really put any policies on the table that would affect the Melbourne residential property market that differently. Owner occupiers will certainly not be perturbed any more than the average Australian is.

So, if business runs as usual, then I would foresee the increase in stock coming into spring assisting prospective purchasers. As long as the stock levels do not dip, prices should remain relatively flat for the rest of the year. It would be unlikely to see any further drops from the highs of March and April. Whilst the market began to climb out of the doldrums in November last year, it picked up to freight train speed by mid-April; it has again slowed to a sustainable pace. If we average the growth over the past 12 months, we are probably in a sustainable range for long term growth.

There will be some angst whilst the Election is worked out and Victorians have another election coming up in November as well. This will also add to the stabilisation of price growth. The Reserve Bank is unlikely to keep interest rates on hold for too long, unless the banks raise their rates independently of the Federal Reserve, and this will also mean a more stabilised growth for property in Melbourne.

Rental yields will also factor into price movement in Melbourne. Melbourne has the lowest rental yields of any capital city in Australia according to RP Data. This is caused somewhat by the strong capital growth over the last 12months. During the stabilisation of price growth, yield will naturally creep up, making Melbourne residential property both a good long term growth prospect with a growing rental yield.

Overall, buying good property in Melbourne over the next five years will depend as much on property choice as it will on your negotiation skills to earn excellent growth and good yield with your investment. We are running several seminars over the next couple of months. We will be looking at market trends, property assessment and negotiation skills. We will also have experts in finance and accounting at different seminars.

If you are interested in attending one of these free seminars please register at our website or call us on 9523 1054

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.

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