Twenty Percent of Apartments Resold at a Loss

By Peter Sarmas on 3 Apr 2016
No Comments yet, your thoughts are very welcome

 

Melbourne Auction Results 3rd April 2016

73%
Clearance
Rate

405
Reported
Auctions

Sold at Auction: 295    
Passed in: 110  

 

Sold Before: 68    
Sold After: 0    
       

 

A clearance rate of 73 per cent was recorded this weekend from 405 auctions reported to the REIV, with 295 selling and 110 being passed in, 53 of those on a vendor bid. There have been 11 suburbs with clearance rates above 90 per cent this year, including Collingwood, Dingley Village and Seddon.

It’s still week one of school holidays and with the ANZAC weekend only 2 weeks away i’m not expecting a mad rush from vendors to put there properties on the market, so stock levels will continue to reamin low. Having said that, vendor enquiries seem to be on the up but time will tell whether sellers will take their chance and list in the month of May, traditionally the last month before winter sets in and the property market takes a breather until August.

 

Twenty Percent of Apartments Resold at a Loss

 

 

 

 

 

 

 

 

 

 

Photo Source: Istock

Twenty Percent of Apartments Resold at a Loss

Well we’ve managed to see through the first quarter of 2016 already and as far as property prices go although there has been signs of slowing there are no signs of collapse, especially in Melbourne and Sydney.

The latest figures released late last week by Core Logic RP Data show a slowdown in capital growth to 6.4% annually from 7.4% for the same time last year. Melbourne was the standout city with dwelling prices growing 9.8% over the past year, Sydney recorded an annual rate growth of 7.4%.

There is starting to be a distinct separation between the price growth of detached homes compared to price growth for apartments. This was highlighted in the recent Pain and Gain report also published last week by Core Logic showing nearly 20% of all apartments resold in the Melbourne council area the last 3 months, were done so at a gross loss.

Reports are filtering through where Off The Plan Buyers (OTP) are reselling their completed homes at 10-20% losses but I don’t believe this will mean the collapse of the entire Melbourne residential market.

What we are noticing is a definite slowdown and a tightening of stock levels (excluding new apartments), which is typical what happens in a softer property market. This shortage of properties is helping to keep prices stable, in particular in the higher quality suburbs. Detached homes, units and town house with some land component are being sought after by first home buyers and downsizers in the current market.

There is no doubt the OTP market will see pain for at least four more years according to BIS Schrapnel, until the oversupply glut in Melbourne begins tapering off.

In terms of capital growth and asset types, the Pain and Gain report clearly highlights what type of property investors should be buying and where they should be buying. In a nutshell, detached homes outperformed apartments, while capital cities outperformed regional areas in terms of capital gains as saw limited losses.

This really highlights the importance of buying a property with some land component in a capital city which has strong employment, population growth and good infrastructure. 

 

Median Prices Expected to Show a Technical Fall

For those of you watching the property market closely, I expect to see significant falls in median property prices. But don’t think for a minute we are heading for a downturn.

As more apartments come to completion and the sale is registered with The Valuer General’s office, a large majority of sales at these lower prices will impact the median prices of suburbs where there are large number of developments being completed.

A recent example where I witnessed this erroneous reporting was in a paper written by a “property expert” which showed median prices in the suburb of Northcote falling by 29%.

What makes this so interesting is that homes in the area are in short supply and houses being listed by real estate agents are being sold by vendors. This means that vendors are meeting their expectation on price.

So to measure a down turning market, something as significant as 30% we need to see clearance rates fall below 50% rather than the current 72%.

 

Mortgage Lender Blacklists 140 Suburbs

Mortgage lender AMP recently put 140 suburbs around the nation on a Black List which it will place tougher lending regulations.  It’s the usual suspects for Melbourne but also quite a number of suburbs in WA and Queensland, both lately have been touted as “great investment opportunities” and have attracted much investor attention.

The warning signs are beginning to sound for Queensland by property experts like Michael Matusik, this before the Commonwealth Games in 2018. And for those who remember, we all know what happened to property prices in Sydney after the 2000 Olympics, so beware!

 

Melbourne City the People’s Choice

In another bit of information which will help stabilise property prices in Melbourne the city became the fastest growing capital with a 2.1% population increase (91,600) for 2014-15. We now have close to 2,000 people a week coming to live in Melbourne. The city’s population is expected to surpass Sydney’s by the year 2056, housing up to 9.3million residents and dwarfing its current 4.4million figure. Impressive!!

Interestingly 72.8% of net overseas migration to Australia over the past year has been to NSW or Vic, the highest percentage since December 1984. As far as which state is the most popular, Melbourne is the winner again with more residents emigrating into the city (up 1.7%) at the expense of its bigger sister city Sydney.

However, latest statistics released show NSW performing better than Victoria in providing jobs, boosting employment by 177,300 in the year to February, compared to 149,600 for Victoria.

 

What our Clients Are Saying?

We would like to thank you for all your hard work, your advice and your attention helping us to secure an excellent investment property.  Being first time investors, you were happy to spend time with us explaining how it all works and always happy to answer our many questions. You sorted through lots of properties according to our brief to finally secure a fantastic place in a great location and at an excellent price. You made negotiating with the vendor’s agent a breeze and your knowledge of the industry and players was a huge advantage.  All in all, we are so glad we had you as our advocate for this purchase and we hope that we can work with you again in the future. Peter and Jenny.

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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For a basic snapshot of your suburb’s performance or a property report customised for your property, request a Free Market Report.

If you are thinking of buying, selling or investing and would like a FREE 5 minute chat with Street News Director Peter Sarmas, please contact him on 0418 740 606 
or via email at [email protected]

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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