With an REIV Auction clearance rate again above 60% it is easy for property commentators and agents that look at one market to say the market has probably bottomed out. You can look at one data analyst’s figures and say the market is improving, you can look at another and it is “obvious” that the market is falling. I have written here many times about median statistics and it is obvious to me that annual figures where there are literally thousands of pieces of data show enough sales to render some reasonable conclusions.
Looking at Valuer general for 2010 the market over the full twelve months, looking at 56,024 pieces of data, the median house price in Melbourne Metropolitan area still rose by 17.8%, from $420,000 in 2009 to $495,000 in 2010. In 2011 looking at 49,071 pieces of data the median house price went down by 1.01% to $490,000. This data gives a very good indication of market movement. Median unit prices in 2009 were $385,000 (38,298 pieces of data), $430,000 in 2010 (30,315 pieces of data) and $425,000 in 2011 (22,797 pieces of data). This represents a rise of 11.6% in 2009 and a drop of 1.16% in 2011. Currently the monthly movement of a single suburb can be based on less than 30 pieces of data. We can look at the coal face of the auctions to get a feel of how the market is moving, but as far as definitive movement we need to analyse thousands of pieces of data to get a realistic view of what is happening to Melbourne’s property market.
I attended an auction in Ivanhoe on the weekend. It was a reasonably well renovated period home but on extremely small land compared to most others in the area. The house was nice and if it were on a full size block would have done very well. The home appealed to families looking at probably upsizing into a 3+ bedroom home. The location was good and there were plenty of comparables to compare current prices. BUT THERE IS NOTHING ELSE LIKE IT ON THE MARKET TODAY. The property should have sold in the $1.2M – $1.3M. It sold for $1.435M It was announced on the market during a flurry of bidding around $1.3M and the bidding just kept on going. I counted at least eight people bidding and I am sure there were at least a couple more. I cannot remember any time in the last decade seeing this many different bidders at one auction.
Anecdotally, we have a two speed economy in this country and Melbourne has a two speed property market. The above property is representative of the finished family home. It can have some minor flaws, but basically it is a walk in and live scenario. These properties are selling exceptionally well. They can sell well above the comparable price ranges and will attract large numbers of bidders. If you have a property that is well above average for the area and price point, now is an exceptionally good time to sell. There is a distinct lack of good stock on the market and selling agents will work very hard to get your business.
When looking at new estate suburbs we can see a totally different picture to the above. When doing a simple search on RealEstate.com.au we see that Ivanhoe has 44 listings, we can look at a big suburb like Camberwell and we see 76 listings. A suburb like Doncaster which has seen quite a lot of new higher density growth with large unit developments has 140 listings. And even Richmond which has huge amounts of new development has 216 listings. When you compare this with the likes of Point Cook, 1484, Craigieburn, 935, Doreen, 1085 and Pakenham with 1646 listings you can see that the new estates have a lot more stock available for sale. Please note this is anecdotal evidence, not empirical evidence. I have not analysed every listing, nor checked to see how many duplicates there are, it is simply to show the point that new estate suburbs have a great deal of stock to move and established suburbs, even those with large developments occurring within them have nothing like the supply that the outer areas have.
For the owner occupiers that have been waiting for two years for the market to “settle down” I think we can see that it has definitely levelled out from the 10%+ growth per annum, but we can also see that established suburbs are not in free fall. A change of 1% is negligible over twelve months. If you are contemplating purchasing in a new estate suburb, however, I would be cautious about what and where you purchase. There seems to be an oversupply in some areas and it will depend on the demand as to whether the median price drops heavily in these areas.
Ian James
Director
JPP Buyer Advocates