Market Comment – Monday September 7th 2009

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Melbourne’s property market keeps surging through week after week. Another 80%+ clearance rate after 567 Auctions reported to the REIV, with the usual 700 odd private sales as well

After securing 4 from 6 last week, noting that all 4 successful purchases were prior to auction, we can see the last quarter of this year building in a similar fashion to the December quarter of 2007. The REIV reported a 12.8% rise in the median price of Melbourne property in that quarter. This was on the back of interest rate rises in both August and November which had the RBA rate 3.75 percentage points above where it is now.

We have low interest rates, we have solid demand due to population growth, and we have low unemployment and an outlook that looks like we will go back to a labour shortage not an unemployment problem. We do not have enough homes and those who own property are not in any rush to sell. Property prices in Melbourne have nowhere to go but up.

Looking for bargains in Melbourne does not mean looking for the cheapest purchase. The media simply look for cheap property not good long term investment. Carlton units are very affordable with a median of $225K but if we look at the Value General median movement of units between 2003 and last year, the average growth was negative. In 2003 the unit median for Carlton was $282,000 and last year was only $233,125. On average the property dropped about 3.5% pa. Even with the colossal growth we have seen this year in prices RP Data’s median of $225k (not the same data source as Valuer General) is down again. This is university student living areas. You will always get a very good yield but always very limited growth. If we look back to 1980 we can see there has been an average growth of about 6%pa. We target areas that have achieved 10% or higher or have had major infrastructure changes and therefore may increase ahead of historical values.

Don’t buy property because it is cheap. Make a plan, look at historical growth or a change in infrastructure that can bring about change to the historical values such as a freeway extension or investment in the area.

If you do not have time to do the research call someone that has already done it. We would be happy to sit down and have a chat without obligation.

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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