Market Comment – Monday 9th August 2010

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There were 147 (14.5%) few sales reported to the REIV last week than the week before. Auction numbers were down by 55 (8.8%) and the clearance rate was at 67%. These numbers are similar to those throughout July but down on the first week of August.

Apart from the obvious “PRICE BUBBLE” theory, there may be some other reasons for these results. Firstly, the average person in the street does not like uncertainty. We are currently in the middle of an election campaign that is difficult to call. If it were a forgone conclusion that one or the other party had the election sewn up then I don’t think this could be a contributing factor.

Secondly, we have the media headlines “Forever blowing bubbles” (The Herald Sun 9/8/2010) or “Agents find room for gloom” (The Age 8/8/2010). Continual gloomy headlines can have a “self-fulfilling prophecy” effect. The general public, who don’t fully understand the market, keep reading gloom and doom similar to Professor Keens’ “40% property price drop” statements starts believing the hype and becomes nervous in the market place. This leads to lower clearance rates and then more headlines about potential property price bubbles.

Lastly, we have the obvious issue that we are in the middle of Melbourne winter. A fairly cold and miserable one at that. This is traditionally a slow time for the real estate market.

We have talked about this quite a lot in recent weeks. When you look at too small a time frame, then it is difficult to get proper perspective. There have been 17,144 auctions reported to the REIV this year as compared to 9,287 for the same time last year, according to Robert Larocca of the REIV. With this sort of sales increase a small correction is obvious. But to assume a full scale slide into another financial crisis is probably a very silly.

The RBA has issued statements saying they do not believe there is a price bubble. Over the past 30 years property prices have steadily increased by about 10%p.a. And there is no reason to doubt this won’t be the case for many years to come.

It is difficult to imagine that with a housing shortage that everyone agrees we have, that property prices will drop anytime soon.

If you are considering purchasing a property please do not hesitate to call and make an appointment to come in and have a chat.

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.