WHAT'S THE MARKET GOING TO DO THIS YEAR?
After everyone has enjoyed a much needed summer break from work that has coincided with the annual auction market break, the question of what the market is going to do this year is being asked of us almost daily! Depending on who you listen to, the forecasts can be vastly different, though the general consensus is that the market will not be seeing any growth this year. Coming after a year of mixed results in the property market, Moody's Analytics said last month that it believes house values across the nation's eight capital cities will fall 3% this year, after a 1.7% drop in 2018. There is no way to know for sure until the market starts up again in February and auctions/sales begin to take place. Every year, for the last few years, the predictions have been generally pretty gloomy at this time of the year, but last year was the first time that they eventuated into some actual declines in property values.
Most experts believe that there is likely to be a little further downturn before the market improves again, either later this year or in 2020. To put some of these predictions into perspective, even if the most dire of forecasts on value was to come to fruition, the Melbourne-wide median house prices would fall to a similar level they were at in the 2016/2017 financial year. KPMG's report on housing affordability in Australia's two largest cities predicts that the Melbourne market will lift again in 2020, while Sydney will not rebound until 2021. It also predicts that Labor's proposed changes to property taxes, including negative gearing, will not have a major impact on the market should they win the federal election. Bankwest managing director, Rowan Munchenberg, said he believes that provided employment remained strong, the property correction would not become a cliff.
In terms of market performance, the city of Stonnington and surrounding suburbs fared better than the overall market last year, which saw Melbourne-wide clearance rates drop below 50% by the end of the year. Whilst our inner-city market operated at over 60% from 1st July, and our Armadale office even better, at just shy of a 70% clearance for that same period. We had a surprisingly busy end to the year as an office, with 18 sales for the month on December, despite the auction market closing on the 15th, so clearly the desire to purchase was still strong in our inner-city market right through to the end of the year. If you look at auction numbers as a whole, the end of the year was indeed a busy time, with over 700 more auctions Melbourne-wide in 2018 than in 2017 - and this may very well have contributed to the lower clearance rates. While some people have been negative about the auction market, the REIV reports that quarterly change in housing prices from September 2018 to December 2018 was -0.2% at auction, compared to -2.2% at private sale, highlighting that the auction market has continued to prove beneficial to vendors.
So what does this mean leading into a new year? If you use past history as the first example, then you’d be buoyed by the last few years of pre-Easter activity; consistently strong clearance rates of 70-80%, strong median house price growth and plenty of buyers around. While we are not expecting this traditionally strong start to be quite as good this year, there are still consistent factors that do cause the market to typically open in this manner. The first of which is due to the fact that the market has no auctions for the better part of two months – which starves prospective buyers of choice as they are priming themselves to secure something once the market re-opens (last weekend saw well over 200 buyer groups attend our office's open for inspections). Another key market indicator – interest rates – were again held this week, and continue their 18-month-low of 1.5% (RBA cash rate), with most commentators suggesting that this is likely to remain the same for some time to come. And while the credit squeeze has tempered this factor somewhat, it still encourages buyers to explore the market, particularly first home buyers (of whom 49% are borrowing from the bank of Mum & Dad). Lastly - supply and demand – in the inner-city market, highly desired land is being knocked over to build units, only making the dwindling housing numbers more desirable and sought after. Add in that Melbourne is one of the fastest growing cities in the world (matching cities in India & China) and soon to become Australia’s most populous city, and you can understand why demand is still higher than supply.
Our focus has therefore now shifted to the pre-Easter auction/sale market, which as mentioned has proven to be a reliably strong sellers’ market over the last few years, but is likely to present some new challenges for sellers this year – so if you’re thinking about selling your property, book in your campaign now – or alternatively speak to us about the success we’ve had with off market sales in the spring and early summer markets.
835 High Street, Armadale