Market Comment – Monday May 5th 2008

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As I am sure everyone is thinking 60% clearance rates means the end of the property market as most people understand it. With the quarterly median price across Melbourne falling 8.6% from the December Quarter to the March Quarter, it is obvious we need to sell all our property, all our shares, take our money out of banks that are going bankrupt and place all our money under the mattress or bury it in the back yard. If we read everything that is currently being written then we may be thinking of some of these things.

Let’s look at some numbers that span a reasonable timeframe. The Valuer General gives us increases every year going back to 1999, with an average increase across the whole of the metropolitan region of 10.5% pa. This does not include the 2006 – 2007 figures as they are not yet available but we know they will substantially increase this average. Within these years there have been times of almost no growth such as 2004 – 6% and 2005 – 3%, and there were some excellent years of 2001 – 18% and 2002 – 16%.

In other words, trying to justify the market movement and where it is headed by looking at one quarter’s movement is absurd. We know that Melbourne has now “slipped” to the fourth highest median priced capital city behind Sydney, Brisbane and Perth. Adelaide and Hobart still trail Melbourne. If we look at the current housing shortage, the fact that we have more people coming into our fair city than any other and the fact that our median prices are the fourth lowest, it is fairly obvious that the “downward” trend of the past three months cannot continue for very long.

It is true that interest rates and the world economy are in turmoil. Europe and the Americas are slowing whilst the Asia Pacific region is going from strength to strength. China’s property boom may end up with a closing of the market to foreign investment. If we assume the interest rates are not going to continue to increase and the government (both federal and state) give us a favourable budget, then we must assume that further investment in the “Australian Dream” of owning your own property will continue. This will compound the distinct lack of supply in Melbourne and ultimately raise prices.

As far as individual suburbs are concerned, in any major shift in the market, the suburbs with a median furthest away from the overall Melbourne median will be the most volatile. This means that they will be the first to go down in a downturn, but will also be the first to go up in a turn around. Suburbs that show good infrastructure, good job prospects, good transport and recreational facilities will continue to outshine the others. There will be some good buys in the next few months, with some excellent negotiation opportunities, however, do not wait too long. The market will turn up again, AND WITHOUT MUCH NOTICE!!!

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.