Housing Affordability Continues To Freefall

By Peter Sarmas on 4 Sep 2016
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Melbourne Auction Results 4th of September 2016

79%
Clearance
Rate

712
Reported
Auctions

Sold at Auction: 560    
Passed in: 152  

 

Sold Before: 69    
Sold After: 0    
     

 

 

Source:REIV

 

Melbourne Market Wrap September 4th, 2016

This weekend ushered in the start of Spring with the AFL Finals series commencing Saturday the 10th of September. Although we have two properties going under the hammer next week, the AFL Finals series should see a significant slowdown in property numbers as vendors steer clear from what’s traditionally a busy football period.

A clearance rate of 79 per cent was recorded this weekend compared to 78 per cent last weekend and 75 per cent this weekend last year. There were 712 auctions reported to the REIV, with 560 selling and 152 being passed in, 76 of those on a vendor bid. Auction sales were solid in August – the 76 per cent clearance rate for the month was one of the highest this year.

 

shutterstock_Sydney_City

Source: Shutterstock

 

Housing Affordability Continues To Freefall

Australia’s housing boom has continued, with the latest Core Logic data showing a 1.1 per cent rise in house prices across the capital cities in August, mostly driven by Melbourne and Sydney.

Despite tighter lending standards, Melbourne and Sydney grew by 7 and 9 per cent respectively to August. Far from last year’s peak of 14 and 18 per cent growth it appears that property prices are slowing, but these figures although not double digit are still staggering, especially when compared to lower than expected wage, inflation growth and underemployment.

Core Logic’s Tim Lawless does not believe the latest interest rate cut last month by the Reserve Bank has much to do with the continued the strength of house prices in Melbourne and Sydney. Instead pointing to the economic strength of these two cities and historically low interest rates which are allowing investors to gear further and buy investment property.

These are extraordinary times, mortgage rates at sub 4 per cent for investment property, while rental yields for units are 3.9 per cent and 2.8 per cent for houses, this means monthly out of pocket expenses are minimal.

Affordability and underemployment is expected to worsen, many would-be-buyers will continue to be locked out of the real estate market. But there will also be a huge transfer of wealth over the next 10-20 years as baby boomers die and leave the proceeds of their property or aged care bond to the next generation. Funding sources like the bank of mum and dad, co-sharing/buying and other disruptors will continue Australians love for property.

It is troubling times for the Reserve Bank of Australia, caught between lowering rates for the economy and fueling the property market in Melbourne and Sydney further, the board are due to meet tomorrow for a decision.

 

10-Canning-Street-NM_(1)

Sc:Nelson Alexander

Auction Results, 10 Canning Street North Melbourne, (Street Advocate)

Signs for buyers over the weekend did not fair well. I visited four open houses and went to two auctions across Melbourne on Saturday, all were heavily inspected by buyers while the two auctions were well attended and fiercely bid.

Whether this is due to the lack of quality stock, pent up demand from buyers, a fear that finance conditions and lending will change or all of the above is uncertain but buyers we saw were keen to buy a property.

We had been looking for over 12 months for a substantial home in specific inner city areas for our client. Although we had viewed and expressed interest in couple of homes the timing and home just wasn’t right for our client. This time though we came across a magnificent home in an up and coming area, North Melbourne.

Number 10 Canning street was a mock Victorian home built over 20 years ago in a Heritage Listed street. The house was perfect for my client, he could easily move in with his partner and over time, experience substantial price growth.

You see North Melbourne is undergoing significant gentrification. Not only are properties closely located within 2 kms of Melbourne’s CBD and appreciating rapidly, but quality built large homes with good car accommodation on sizeable land are attracting considerable attention and money.

And so it was, we arrived to buy the property along with a crowd of 100 plus onlookers who also turned out to witness the sale. Quoted in the low to mid $2million mark, we knew based on past sales the property would fetch more.

Auctioneer Arch Staver began proceedings with a bid from a buyer advocate who hoped to knock out the competition by opening close to the reserve price at $2.42million. Unfortunately for him a flurry of bidding continued until the opposing buyer had run out of money at $2.65mil. We then commenced to bid aggressively to knock out our opposition til the price reached $2.70mil, then there was a stall for a few minutes and the agent began calling “once, twice..” the bidding commenced again, this time in larger amounts and at a greater pace finally stopping at $2.8mil. At this point we thought we had the property with a knock out bid and again the property was called “once, twice… ” by the auctioneer, this time a new bidder entered the arena.

Back and forth the bidding continued in varying lots until finally we had reached my recommended maximum price, the property selling above this for $2.92million, unfortunately not to us.

A lack of quality stock in quality areas seems to be the major cause for such competition. In these type of situations it is easy to get carried away and pay substantially over  budget and market value only to regret the decision days or years later.

The job of a good advocate is not only to bid and negotiate a sale but also to prevent the client from paying too much for a home!

 

Street Advocate Client Reviews, 118 Bridge Street Eltham

We found Peter Sarmas from Street Advocate took the hassle out of finding the right agent to sell our property and ensured a maximum result. By using Peter and his company we avoided the need to come up to speed on the most effective way to sell our property, as Peter has many years of experience to leverage on.

Not only did Peter find the best agent and negotiate a great commission rate for us, his fee was included in this negotiated fee! He kept up to date weekly with all the details, allowing us to focus on other things. We got a fantastic outcome, $130k above the reserve price. For us using Peter again would be a no-brainer.

Karl and Henty Punt, 118 Bridge St, Eltham

Thinking of buying or selling a home?

Visit our Street Advocate website or send an enquiry below or just call

Peter Sarmas on 0418 740 606.

 

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About the Author

Peter Sarmas is a Certified Property Investment Advisor (PIAA) and Vendor/Buyer Advocate. Before becoming the founder of Street News, Peter completed a Degree in Applied Science (Chemistry) and a Graduate Diploma in Property Valuations (Hons). Peter believes property investing is a major and potentially risky undertaking. In his view, everyone should have an independent person acting on their behalf when seeking property investment advice.

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