Like you, I have been reading about the demise of property prices collapsing, yet this is a contradiction to what is actually happening on the ground.
There are less listings, clearance rates are low but I ask why would you list your property when there is so much negative sentiment? It is normal behaviour not to list. Similarly, there are reports that there is a collapse of clearance rates. It’s not so much that clearance rates have fallen, it is more about auctions simply don’t work when you don’t have demand. Again, it’s normal behaviour to convert most campaigns to private treaty and that is the best approach. In my estimation, the take up of digital auctions has been minimal and I estimate would represent no more than 10% of the market. Usually auctions represent 25% to 30 % in Melbourne. Agents and vendors are worried about a failed campaign so it’s natural not to make that public knowledge. This is just common sense and most agents understand that. I am not going to experiment with vendors I am advising as their advocate. Those who believe we will not return to public auctions clearly do not understand the machinations of real estate. There is also a much higher number of sales that are occurring off market without being advertised. Most of my most recent transactions have been off market. No-one knows what percentage of the market off market represents and whilst increasing it is not a large percentage. The big agencies still catch more fish than your average buyer’s agent and have the marketing budgets and size for that to continue for some time.
According to Corelogic data, house and unit prices in Victoria actually rose for the month of April combining both capital city and regional indices. Naturally, we just got the glass half empty from most of the media who neglected to report on regional results.
For the month of April, house prices in Melbourne fell by -0.4 %. This is hardly a collapse as reported in many news bulletins. Regional Victoria increased by 0.8%. The combined result showed a gain for houses of 0.4% for April.
Annually, to the end of April Melbourne house prices are up 12.8%.
If we turn to units, to the end of April in Melbourne, units are up 0.1% and up 1.4% for regional Victoria. The combined result for units showed a gain of 0.8% for the month.
Annually, to the end of April unit prices are up 11.5%.
New listings are down 35% for April and settled sales are down 40%.
The median house price for Melbourne is $818,806
The median unit price in Melbourne is $588,204
In the previous month of March, median house prices were up 0.4% and units too rose 0.4%.
We are yet to see large discounts in property values and I am doubtful that this will occur for the following reasons:-
- Reduced listings/stock shortage will cause prices to hold particularly for detached family homes.
- There have been a sharp fall in dwelling commencements and housing starts. This lack of new stock will continue to undersupply the market.
- Holding costs are traditionally very low. Interest rates at current levels mean most vendors can hold on.
- Job Keeper Allowance and Government stimulus will support the property market and reduce mortgage stress.
- Property with exposure to tourism and education are at risk of largest falls. Student accommodation and high density investment apartment stock particularly in areas such as Brunswick, Carlton, West Melbourne, Clayton, Springvale, Broadmeadows, Footscray and Preston. These areas are supported by University campuses.
- Holiday homes also go on my watch list. These properties are generally the first to offload in times of trouble. I expect stock levels to rise in Melbourne’s Mornington and Bellarine Peninsulas. Vendor price discounting and days on market will rise.
- Prestige property over $3m in value. Whilst I don’t believe many will be tested in this market, lending controls are tighter in this segment. Executives who rely on company dividends, bonuses and profit share will have reduced capacity to buy prestige property and the foreign buyer market for this category is now closed.
- Funding of development sites is difficult. Investors are returning to cash with many deeming property development risk too high. Small to medium sized developers, have and will go to ground.