Cheap Money Spurs on Melbourne Market

A clearance rate of 73 per cent was recorded this weekend compared to 73 per cent last weekend and 78 per cent this weekend last year. There were 761 auctions reported to the REIV, with 559 selling and 202 being passed in, 89 of those on a vendor bid. The outer suburbs have seen a significant increase – about 25 per cent – in the number of properties sold at auction this year.

This weekend we were back to strong auction numbers with the REIV reporting 761 auctions going under the hammer. This was significantly lower than the 900 initially expected leading up to Saturday.

The clearance rate for the weekend was strong although speaking to a number of real estate agents, visiting opens and auctions there wasn’t the typical froth and bubble we have witnessed in the previous two years.

This is very much confirmed by the statistics when you compare last year’s auction clearance rate of 78% for the same period to this week’s 73%. Nonetheless, our current clearance rate is a good barometer of the market and really gives perspective as to its current strength. To put things into perspective, for every four homes being auctioned three are selling.

Low interest rates and cheap money, combined with a continued lack of supply for quality properties has meant clearance rates and prices remain solid. We are also witnessing the odd runaway auction surpassing the vendor’s reserve, however this seems to be the exception. The general feeling is that the current property is more balanced with less panic buying.

Warning over the horizon

Negative sentiment about property appears to be creeping into the market which, coupled with a tightening of mortgage lending, is taking its toll in some areas particular the apartment market.  We have discussed this market in much detail and flagged it in the past as a huge danger to the Australian economy and homeowner wealth.

The two big factors which could potentially cause headaches to mum and dad investors are the recent changes by banks to toughen lending standards and the price falls in apartment prices already beginning to surface. Both factors are and will play a major role in diminishing the wealth of many unsophisticated investors and owners.

The Reserve Bank of Australia sent a warning last week when it expressed concerns over falling rental property prices, reducing the income of many property investors and making it harder to sell their property. This coupled with falling apartments prices and valuations on completed new apartments is seen a major ‘risk’ to the Australian economy.

For those of you interested, I’m not too concerned about good quality property which has been performing steadily over the past 10 years. What i am concerned about is for those investors who have speculated on their purchase, or been ill-advised, as they are certain to have many sleepless nights. Also, expect to see a rise in litigation against developers, as prices in apartments continue to fall and stories of investors’ losing their life savings begin to emerge.

My only hope is that the greedy advisors who put these people’s life savings at risk will be forced to pay the difference between what the buyer paid for the off the plan property and the price which the buyer sold the property. As was the case recently when a finance broker who gave unqualified advice to a buyer, was ordered to pay the amount of money lost ($115,000) by the purchaser upon the sale.

The Economic Front

Last week the latest unemployment figures were released which on the surface looked positive. Unemployment fell by 0.1% from 5.8% to 5.7%, but before we go hi-fiving each other the number of hours worked also fell by 1.8million hours, pointing to a work force working more hours part time rather than full time.

On another note, the Andrews government seems to have come up with an interesting way of raising some much needed revenue. The State Labor governement is currently in discussions and floating the idea of taxing owners of empty properties in Victoria. The good news is that some of the money raised, should this bill be passed, will go towards providing shelter for women in abusive relationships.

Finally, I need to share this interesting fact

Recent FIRB statistics released show Chinese investment in Australian property has doubled and FIRB approvals have jumped by 75% overall,  but that’s not the interesting part. I sat down over the weekend and calculated that if these internationals had bought property when the Australian dollar was at $US0.68 they had actually made a mozza without any price rises. 

You see the Aussie dollar has risen about 15% ov er the past few months against the US dollar which means anyone lucky or smart enough to have bought a property in Australia when the dollar was at its lowest could have made a $100,000 gain, assuming a $700,000 purchase! So it’s not just rising house prices which benefit international buyers but favourable echange rates. No wonder we are seeing such an influx of foreign money.

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.

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]