Market Comment – Monday 8th November 2010

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Clearance rate plummets to 61%! What will happen to the property market?

Simple, it will slow down for the next six weeks then take off again in March next year. Good property is still selling very well at all levels of the market; from the multi-million dollar mark to the excellent investment options that are out there.

45 Dickens Street in Elwood sold under the hammer for $3.335M after 4 separate bidders fought out an epic battle. 800 sqm of land with a beautiful period home. On the other end of the scale, 5/202 Lennox Street Richmond, a delightful 2 bedroom renovated apartment, quoted low at $450k+ (this style of quoting is soon to be outlawed) went on the market at $520k and sold under the hammer for $539k. A very good price for any investor.

There are now 4 main factors slowing the market down. All of which are temporary and will probably be low priority factors by February or March next year. Then the market will do what it does every time our economy goes into overdrive. Prices will sky-rocket.

We have federal politicians who have no idea how to handle the parliament yet. This year’s election still has no real winners. And this makes the average mom & dad nervous. Wait until we have a bill that Julia Gillard really needs to get passed. If Ms Gillard needs to “buy” the Greens vote, but can’t afford it, then she may have to compromise with the Liberal party instead. That will make for very interesting governance!

Secondly, we have a State election here in three weeks, and the commentators are predicting another hung parliament. Won’t that be fun!! As many voters move away from the Labor party, unfortunately some of them vote for the Greens. If the Greens candidate does not get up then the vote goes back to the Labor party through preference distribution!!

Thirdly, we have interest rates going up. They have reached 4.75% and this puts them in an “average” category. They are not excessively high nor are they historically low. This is the greatest indicator of where price will go in the short term. As our economy strengthens, the RBA cash rate goes up and house prices increase. Whilst there is always a short term hiccup, overall property prices will rise sharply: probably starting about March next year.

Finally, the banks themselves are the fourth factor. When was the last time three out of four banks did not put up their own variable rates in the same week the RBA raised the cash rate? Only CBA have bumped their rate and the press are eating them alive. The indecision of the other “three pillars” will also be weighing heavily on people’s minds.

All these factors, except Australia’s growing economy will be sorted out by early next year. There is now a six week window for canny investors to get into the market before the jump in the first half of next year. If you purchase well now, you should have excellent growth throughout 2011.

If you are interested in purchasing a property this year please give us a call

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.