Melbourne Property Market Update – December 13, 2014

By Peter Sarmas on 13 Dec 2014
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This year’s spring auction market has been the strongest ever, and there have been two record auction weekends in the past five weeks. Peter Sarmas explains, for those looking to invest in property, it’s also worth pointing out the strengthening demand for houses rather than apartments.

ASIC will conduct a surveillance into the provision of interest-only loans as part of a broader review by regulators into home-lending standards. The probe will look at the conduct of banks, including the big four, and non-bank lenders and how they are complying with important consumer protection laws, including their responsible lending obligations. The review follows concerns by regulators about higher-risk lending, following strong house price growth in Sydney and Melbourne.

Investment lending continues to surge in October, no wonder APRA are concerned. The Australian Bureau of Statistics (ABS) published housing finance data for October earlier this week. The data release coincided with the Australian Prudential Regulation Authority (APRA) sending Australian Authorised Deposit-taking Authorities (ADIs) a letter on Tuesday afternoon.

Clearance rate remains lower than when spring started. A preliminary weighted average clearance rate of 66.6 per cent was recorded this week across capital cities compared to 63.7 per cent last week and 64.5 per cent this time last year. High auction volumes and a market where value growth is moderating explain why the capital city auction clearance rate has remained below 70 per cent for the past 10 weeks.

NAB announced that it expects the Reserve Bank of Australia to reduce the cash rate to 2 per cent by making 0.25 per cent cuts in March and then August. It comes after Westpac forecast that the Reserve Bank would reduce the cash rate both in February and March, which would mean a rate no higher than 2 per cent. The cash rate is currently at a record-low 2.5 per cent, where it has remained for 16 months.

What are the high yield, high capital gains in the Melbourne market? Investment decisions in property are often presented as choices between yield and capital gains. In Melbourne, there is a small selection of suburbs where both objectives can be met; they have above average capital gains and a yield higher than the citywide one.

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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