There have been many contradicting reports in the media about the property market and it is no wonder the everyday consumer is confused and unsure. We are all very well aware of the challenges that come with finance and we hope that there is some reprieve on the horizon for the benefit of all. But lets talk about the “real” estate market.
Yes, prices are down year on year but overall they’re up by 12% compared to two years ago. This isn’t something you’ll read or hear much about in the media, because its the less sensational story…
Many macro conditions have remained reasonably consistent, the economy has been stable, unemployment remains low and interest rates haven’t changed for 30 months. But despite all this, I can say we are certainly in a different market.
In recent years buyer interest was exceptionally high. How good was selling in 2015, 2016 and 2017! Vendors rarely considered pre-auction offers seriously. A property went online and within days the price increased and it was sold. The job of agents looked pretty easy.
We are now in a market characterised by old school negotiation. An entertaining auctioneer is great but not as important as turning buyer enquiry into serious offers. If looking to sell real estate over the coming months perhaps the biggest change in the market conditions to consider has to do with the sale method and the major role in negotiating strategy. The implications for Vendors is clear: its not that its a bad time to sell, its choose your listing agent very carefully.
Keen watchers of Melbourne Real Estate will take note that there are a few things worth being cautiously optimistic about:
- Melbourne’s population growth rate of circa 138,000 people over the year ending June 2018. This is forecast to remain steady, therefore putting pressure on supply.
- Vacancy rates average of only 1.93%. This means that an investment property is vacant for 1 week. One could argue that this alone shows that there are not enough rental properties and that this will push yields even higher. Rental yields are already on the rise in Moonee Ponds seeing yields of up to 5%.
- Development funding is difficult. Many Developers are finding it very difficult to obtain funding, so we are seeing many projects being shelved. This puts pressure on supply.
Last few points;
- There are fewer properties on the market these days, actually around 20% less – certainly this has a lot to do with sentiment but it also presents some opportunity for sellers as there is less choice for buyers. While fewer properties remain available for purchase its less likely, in my opinion, that we will see more serious price declines associated with widespread forced sales.
- Lastly, the major headwind faced by the real estate market was self inflicted and could be rectified with concerted efforts between government and the big four banks. The screws on credit could be loosened up. Non-bank lenders have increased their market share considerably and many commentators believe that lending will stabalise as the big four focus on earning back the trust of the Australian people and business.
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See you around!