|It certainly doesn’t pay to be over confident when it comes to the Melbourne property market. In a short period of time market conditions can change dramatically. It was November last year when I left a message with a real estate agent requesting an inspection of a property. The agent in question didn’t return my call so I attended the next open for inspection.
When I questioned the agent as to why my call was not returned he informed me that he has had 30 buyer enquires on the property therefore doesn’t need to return calls. I said to him that market conditions could change for the worse in the future. He said that any future downturn was highly unlikely.
Fast forward 12 months and I have received calls from his sales staff sounding distraught. They are desperately short of properties to sell and unable to sell their current listings due to a shortage of buyers!
Melbourne’s auction clearance rate declined in the first six months of this year It is currently between 60 per cent and 65 per cent.
The proportion of vacant properties in metro Melbourne went down to 3.6 per cent while regional Victoria rose to 2 per cent. A balanced rental market is considered to be a vacancy rate rate of 3 per cent.
Following the Reserve Bank meeting this month, the cash rate has been increased by another 25 basis points to 2.60 per cent, this has been the sixth monthly rise in a row.
Inflation in Australia is the highest it has been since the early 1990’s and is expected to increase further in the months ahead. Inflation is expected to peak later this year and then decline back to the 2 to 3 per cent range.
According to the ABS, the seasonally adjusted unemployment rate for Victoria recorded an increase of 0.6 percentage points taking it to 3.7 per cent.
The Melbourne residential market is certainly subdued at the moment however the usual generalisations about the state of the market by media commentators continue to be incorrect. I attended an auction in Mont Albert recently where there were at least eight bidders.
The performance of property markets in large cities like Melbourne is segmented. That small percentage of properties in quality locations, and streetscapes with scarce and unique features will attract a frenzy of buyers even in current market conditions.
The property market does not have too many similarities with the share market. However the concept of the herd mentality also applies to property markets. If interest rates ease next year which they are tipped to do and the media start reporting more positive news about the property market, this will result in another upward price movement.