Market Comment – Monday 31st January 2011

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The 2011 real estate market has opened. Like all years, it will begin like a huge locomotive. It will slowly gain traction, and then begin to pick up speed before its momentum will carry it through to Easter. The REIV have reported a 54% clearance rate when taking into account all auctions since 20th December 2010. This weekend’s clearance rate was 51% however out of the 126 auctions, 48 have not been reported.

Whilst there were substantial swings and roundabouts throughout last year, as predicted, (Overall, 2010 will bring us a fresh round of record prices. I think we will see at least 10% – 15% upward movement in the inner city and established suburbs around Melbourne – market comment 14/12/2009) the house price median according to the REIV increased by 11.4% from December 2009 – December 2010 and apartments for the same time moved 9.3%. For the first time ever, the median house price of Melbourne exceeded $600,000.

For an opening weekend there was a good result in Highett on Saturday. A unit expecting high $400’s went on the market at $500k and sold at $506k. Whilst I do not expect this property to set a benchmark of any kind it was a good result for the vendor.

Floods: Do not expect anything but political point scoring to come out of the Australian floods. Usually, after a natural disaster of this scale, the economy dips marginally and then comes back strongly as the government spends the money on rebuilding.

Interest rates: I cannot see any movement this month. All other bets are off. I believe there will be one rise between now and June, and it will depend on how much the banks pass on as to whether there will be more. The more interest rates move, the more pressure there will be on homes in “New Estates” and rises in interest will put pressure on landlords to raise rental rates. This will actually have an effect of raising prices in inner city suburbs not lowering them.

Finally, our overall economy is still booting along nicely thanks to China and it also looks like the US is slowly emerging from the GFC, however, do not be complacent about what is happening in the Middle East. Egypt controls the Suez Canal and a substantial amount of oil is carried by ships through this canal every day. If it were interrupted and ten to fifteen days were added to the shipping time to go around, then this could potentially slow world economic recovery. This may have an effect on interest rates or exchange rates and then by extension, on property prices.

Anyone considering a property purchase this year should be looking for expert advice. Please feel free to give us a call or drop in for a chat

Ian James

Director JPP

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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.