Market Comment – Monday November 30th 2009

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We have seen the first weekend since May that the clearance rate has dipped under 80%. And it only dropped to 78%. It has taken the biggest auction weekend of the season to do it. There were over 1500 reported sales to the REIV last week. This equates to about 50% more than normal. AND STILL THERE WAS A 78% CLEARANCE RATE.

The market is not slowing down; in fact it is picking up pace. Agents are already starting to book auctions for February. This, at a time when there are still 2500 auctions gazetted to occur before the end of the year.

There is quite a bit happening in the world at the moment and most of these things will impact heavily on rising house prices. Joe Hockey is primed to take over the Liberal Party, Reserve Bank Governor, Glenn Stevens, is set to give all the mortgage holders in the country a Christmas gift they do not wan to see. Interest rates will probably rise by another 0.25% this month. On top of this all our utilities are about to get substantially more expensive thanks to Mr Rudd.

Don’t forget the Emissions Trading Scheme (ETS) is simply a way to increase our cost to purchase anything that relies on fossil fuels to a point that will make alternative fuels economically viable. In other words, raise the price of fossil fuels by extra taxes to such a point that people will switch to renewable energy because it will then be cheaper.

People are not selling houses as often as they once did. Immigration is also still increasing as is our natural population growth. Our kids are staying home longer than ever. More young urban professionals want to live in smaller dwellings closer to the cities however those wanting a family are looking for the “McMansion” out in the new estates. These areas will be the ones most impacted by rising interest rates and the lack of average capital growth.

All of these things will impact on price of property over the next five – fifteen years. In Europe they have a home ownership near 25% unlike Australia which has historically been around 75%. But this will change, and I think it will change this generation. Young professionals will start to look at long term leasing rather than renting. People will need generations to purchase homes. The average young family will simply be priced out of the market.

Over the next 5 – 10 years those who can afford to purchase property should do so, and buy as many investment properties as they can. This could be the start of the “haves” and the “have nots” When our kids need $200,000 as a deposit for their first flat, if the parents do not have equity to cover this, it will be almost impossible to save this money. On top of this rents will increase rapidly in line with ownership percentages. The lower the ownership percentage, the faster rental prices will rise.

All in all, the Melbourne property market is in for another boom era. As we were saying in our market comments early last year, during all the gloom and doom; Prices of Melbourne property will grow at about 10% per annum, doubling every seven years for the next five to ten years. The exception will be in the new estate areas where growth is usually limited to less than 7%, and considering these areas have been given the artificial stimulus with the increased First Home Owners Grant, the next 5 years will probably be less than 7%

If you require any assistance in purchasing property, please do not hesitate to call us for a free no obligation meeting

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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