We look to the media to tell us what’s happening in the property market. We read about movement in the median house prices and that these are the leading indicators of where the Melbourne property market is heading. And the papers and websites were full of information telling us that Saturday was the first big indicator of the market for the year.
On Saturday evening I, like many others received an email informing me of the clearance rates in Melbourne. I get an email from Realestate.com.au, Domain and the Real Estate Institute of Victoria. At 6.19pm on Saturday I received the first email. Domain has informed me the clearance rate is at 45%. This is an exceptionally low number. Under 50% means the bias is very far in the buyers’ favor, but worse, that it will make vendors think about withdrawing or not selling their homes, making the market incredibly difficult to navigate.
2 minutes later Realestate.com.au sent through their results. 55% clearance rate. Between 50% & 60% this shows us a market only very slightly tilted in the buyers’ favor, and usually it would mean that more vendors would put their homes on the market. These sellers also become buyers and very quickly the market picks up on turnover and slowly over time, the market reverts to an upturned one.
But an hour later I received the final email from the REIV stating a 65% clearance rate. Between 60% & 70% shows the market in a typical sellers’ market. We can expect normal price growth, multiple buyers at every sale and vendors to flood the market.
If we take each of these well respected data analysts at face value we have a market that is favored so heavily towards buyers that it is likely that vendors will withdraw from the market place. We also have a very evenly weighted market that may move itself back towards the vendor and at the same time we have a market that is heavily weighted towards the vendor and looking like the market has recovered from last year. Who do you trust? These commentators cannot be all correct.
So it is difficult to understand what is happening in the market with clearance rates. So we look at the median house prices. On 1st February Tim Lawless from Core Logic told us that “Hedonic Value Index” which Core Logic tells us that it gives the value of dwellings fell 8.3% year on year to January 31 2019 in Melbourne. Yet the press release from the Real Estate Institute of Victoria on 18th January 2019 tells us that the Median house price in Melbourne increased 1.4% over the past year to $826,500.
I know the dates are not exactly the same, however unless we think the Melbourne property market dropped 9.7% during the month of January, one of these statements must be wrong. And unfortunately this is the only information many members of the public get. The most accurate data is that published by the Valuer General of Victoria, but unfortunately the latest prices are for the quarter ending June 2018. And these were published in December 2018 so they are not as current, but they do not spell out the massive drop that Core Logic are estimating.
In December 2018, the Value General of Victoria said the house price median for Victoria had increased by 1.7% since June 2017. This data is based on 93% of sales across Victoria and is based on official Notices of Acquisition.
And that is the rub, we listen to media commentators using small samples of data, they add their spin and make assumptions that can be wildly different to others, or we wait and get the facts, but 6 months after the sales. There is no easy solution to this for members of the public who cannot see the market from an insiders perspective day in day out.
If you are considering buying, selling or tenanting out your property, please feel free to give me a call for a no obligation chat.
Ian James
Director
JPP Buyer Advocates