Is Melbourne cooling?

[Luv2Travel]

According to REIV auction results today:

"The clearance rate from today's auctions was 78 per cent, only the second time in 12 months that it has been below 80 per cent.

The impact of 6 rate rises, affordability concerns and the unseasonally high stock levels are clearly having an impact on demand."

I've noticed an increase in auctions being passed in where I live (inner Bayside). Has been a very high clearance for quite some time, but noticed this week and last week the clearance has dropped considerably.

 

[Bigtone]

Think it will cool Biggles,

numbers at ofi's r way down, hopefully just flatten out for a while and that will reduce some pressure on rates as well.

we really have had 2007 and 09 as massive boom and first half of 2010 so it needs to slow down for a while.

cheers

bt

 

[JIT]

I don't think underlying fundamentals have changed, so no.

Maybe a temporary hiatus and a small buying window with the recent negative sentiment.

 

[Ruddprime]

The impact of 6 rate rises, affordability concerns and the unseasonally high stock levels are clearly having an impact on demand."
.

since when was high stock levels a factor of demand?

Idiotic comments from the REIV

 

[Peter Parker]

I've noticed an increase in auctions being passed in where I live (inner Bayside). Has been a very high clearance for quite some time, but noticed this week and last week the clearance has dropped considerably.

I agree things are cooling down.

An agent near me sticks labels over prices for discounted property. You can sometimes see the old price underneath.

2 years ago some price drops were around 20-30k if not more. As things hotted up there were hardly any labels. There' now making a comeback but the price drops aren't much.

 

[whatever123]

since when was high stock levels a factor of demand?

Idiotic comments from the REIV

If I'm an investor speculating on capital growth I am more likely to buy if stock levels are low, then if they are high.
High stock levels would send a warning to sane investors.

 

[Kennyjaiz]

I don't think underlying fundamentals have changed, so no.

Maybe a temporary hiatus and a small buying window with the recent negative sentiment.

Hi JIT,

Depending on what fundamentals you are referring to (I assume you are referring to factors they may influence supply and demand on housing?).

It's difficult to draw meaningful conclusion out of one REIV comment. Auction clearance results have been consistently over 80% in the past year. However, I do see some "fundamentals" changing.

-FIRB policy reversed (amount of foreign investors demand reduced)
-Immigration policy reduced (demand reduced )
-Availability of credit reduced and credit policy tightened (demand reduced)
-FHB incentive reduced (demand reduced)
-Interest rate higher (demand reduced)
-Other cost of living increased and hence disposable income reduced (demand reduced)
-Incentive and policy to encourage affordable housing (incease supply)
-low affordability comparied to disposable income (demand reduced)
-low yield due to recent high growth (demand reduced)

That is not to say I expect prices to drop. I suspect demand will ease off in the near future, and we may experience a more modest (low to moderate) growth in Melbourne in the coming months. The market will become more segmented with tiered growth (in terms of price range) due to the withdrawal from the FHB segment (either priced out, risk aversion or brought forward decision to buy last year)

With the recent news reports of record number of new unit building approvals (source: http://www.news.com.au/money/proper...s-hit-fresh-high/story-e6frfmd0-1225862524761), if they eventuate, will likely to lead to an income effect in the short term (i.e. with property related industries like builders, plumbers, REA, etc - having more disposable income to spend and invest). This will probably mean the property market can sustain for a short period of time (9 months - 2 years). Whether or not we will see a correction after that will depend on if the developers overshoots the level of demand. This is just a personal opinion.

Any thoughts?

Cheers,
Kenny
PS. I'm a long term property investor with several IPs in VIC and QLD. I am not very skilled at trading properties based on speculation.

 

[BayView]

since when was high stock levels a factor of demand?

I think this is just a "not quite right" way of saying that now there is more stock, the demand has dropped because there are more houses in ratio to buyers?

i.e 4 buyers to 1 house = high demand,
4 houses to 2 buyers = low demand

 

[aussierogue]

I think this is just a "not quite right" way of saying that now there is more stock, the demand has dropped because there are more houses in ratio to buyers?

i.e 4 buyers to 1 house = high demand,
4 houses to 2 buyers = low demand

Greece and the stockmarket drop scaring people - Simple as that.

 

[BayView]

Greece and the stockmarket drop scaring people - Simple as that.

aah! of course.

I hadn't thought of the stock market as a major catalyst for people not buying houses.

My perception is that the other things involved in life take a hiding - the doodads - the boats, the expensive car, the holiday house, the golf club memberships and the like.

 

[aussierogue]

I just reckon in period if uncertaintly most people do nothing. Waiting to see some diretcion is not a bad thing i guess.

 

[Tuppence]

I note in today's Age that agents reported the clearance rate from auctions yesterday at 78%, the first time it's been under 80% this year - FWIW.

 

[yadreamin]

Its only coz its Mothers Day. Everyone was out shopping for Mum and getting lots of food ready to eat and just generally stressing about being and buy the best.

 

[Wibbly Pig]

Interesting article.

http://www.dailytelegraph.com.au/ne...in-the-southwest/story-e6frewt0-1225864001029

 

[Deltaberry]

Housing is not a right, especially houses which are beyond your means. Harsh though it seems, I feel no sympathy for Ms. Mifsud.

If she had made money, it's not as if she would have shared the money with anyone else in this country. So if she is forced to sell her house because she took on too great a risk and ends up losing her equity, it's also none of my concern and there's no injustice about it as far as I'm concerned.

"Soaring repayments have forced them to cut out movies, eating out, going to the football and having friends over."

Oh and I almost forgot, movies/eating out/going to the footy is not exactly a right either. Some people just need to harden up and stop whinging?

 

[BayView]

Just saw the article.

Can you see the house in the background? very nice.

Now, what is wrong with buying yer cheaper existing doer-upper for less, a lot of second hand and borrowed furniture and sheets on windows etc until you get on your feet?

Oh, no; gotta have me a brand new 4 x 2 with the DLUG and landscaping, the house full for Hardly Normal furniture I'm tipping; on the never-never, and use the FHOG instead of real savings (there's a BIG clue as to why they can't afford the house).

Can we get a shot of the car/s? That'd be interesting I'll bet.


And what about this scenario:

Jean Evers, 52, and her husband Garry, 45, fear losing their home.

In January, only four months after they purchased their $415,000 new home on the edge of Narellan Vale with a 100 per cent loan and $24,000 First Home Owner Grant, Mr Evers was retrenched. Since they purchased their home, their repayments have risen by $400.

Everything about their scenario is wrong; their age as FHB's, the 100% loan, and the fact that they have no real savings at their age. What the hell have they been doing for the last 20 years?

Sorry, but if you are 45 (and 52) and have to get a 100% loan AND use the Gubbmint Grant to get you over the line, then the problem isn't the interest rates and the market - the problem is YOU.

AND, which stupid bloody Bank gave them the money in the first place? If they used a Mortgage Broker, that person should be flogged in public for assisting in the debacle.

 

[Mandy Mac]

LOL - But I don't think that article is totally acurate. That girl looks more like a 6 year old, not a 2 year old.

Residex head of research John Lindeman said the First Home Owner Grant and historically low interest rates meant thousands of people entered the market without having established a habit of saving

I think this quote sums it up.

 

[Mez]

Just saw the article.

Everything about their scenario is wrong; their age as FHB's, the 100% loan, and the fact that they have no real savings at their age. What the hell have they been doing for the last 20 years?

Sorry, but if you are 45 (and 52) and have to get a 100% loan AND use the Gubbmint Grant to get you over the line, then the problem isn't the interest rates and the market - the problem is YOU.

.

totally agree here!

 

[Neophyte]

Comments on the Melbourne market.

I watch the outer east (Ringwood/Bayswater and surrounds) units segment. Hardly any stock coming onto the market at the moment. 2bdr units were commonly listing at high 200s, selling into the low 300s. Now seemed to be listing at 310-320. Also commonly 20+ on the market at a time (too many to inspect all in a day), now maybe half that number.

Clearance rate reflects the balance between buyers and sellers expectations. Sellers have priced into their reserves the 20+% price rise of the last year and possibly a bit more. If the market has flattened in the last month, but sellers hoped to squeeze another 5% then that can explain a drop in clearance rates. Its due to over-pricing not lack of demand.

I think the market is cooling in the sense that it is not rising at 2-3% every month. Also there are those listing who are speculative sellers, only willing to sell if they get an offer they can't refuse (e.g. 10-20% more than its worth). Massive increase in POA listings where they won't venture a price.

 

[sash]

I think the Melbourne market will cool ....possibly considerably over the next 6-12months...if interest rates push up another 0.5%-75%.

I am sitting on my hands in the short term as I see more opportunities to get in somewhere in mid 2011 when people start panicking about IR at about 8-8.5% (7.3-7.5% if you get the 0.7% discount).

I fixed most of my rates till mmid 2011......I have a feeling that Sept. - Oct. 2011 will be a good time to re-fix for another cycle.

People this is nothing new.....happens every cycle....