More competition at auctions points to market “green shoots”
Green shoots are pushing up in Melbourne’s residential real estate market, increasing the pressure on buyers to make decisions before housing prices head north again.
Nelson Alexander agents say there is a growing shortage of quality housing stock in prized pockets of the city. This is intensifying demand for property and making buyers more prepared to compete.
Nelson Alexander Sales Director Arch Staver says there is renewed interest at the company’s auctions.
“Bidders are willing to compete, and many are aware that there is a projected shortage of stock for the remainder of 2019,” he says.
“There are definitely some green shoots.”
Melbourne house prices rose by 70 per cent between 2011 and 2017. Data from CoreLogic shows the city’s median house price has pulled back by 11.5 per cent over the past year.
But some parts of the city – particularly in the inner city and the northern suburbs – are faring better than others. Real estate data companies such as CoreLogic and Domain are also reporting ongoing reductions in the rate of house price declines in Melbourne – a clear-cut indicator that buyers are becoming more confident.
CoreLogic data over the past 12 months shows relatively small declines for suburbs such as Carlton North (-2.2 per cent), Collingwood (-3.3 per cent) Fitzroy (-2.5 per cent) and Fitzroy North (-2.4 per cent).
Similarly, Reservoir West was marginally down (-3.3 per cent), as was Northcote (-3.7 per cent) and Brunswick East (-3.0 per cent). By contrast, Burwood East prices took a bigger hit and were down 18.7 per cent); Kew East was down 18.9 per cent and Doncaster East, 15.9 per cent.
Clearly, over the past six months, the broader Melbourne market has shifted gears to a buyer favoured market after six years of seller oriented conditions. But it’s a situation that could change very quickly as supply tightens.
In the first quarter of this year, Nelson Alexander auctions have produced significantly higher weekend clearance rates compared to the last quarter of 2018.
Mr Staver says the company’s clearance rates this year have been close to 80 per cent in Carlton and in other inner city areas, in part because owners are setting realistic reserves.
“Any property that we have listed is selling quite effectively, if it is priced appropriately,” he says.
“But I can’t remember so few quality properties on the market.
“This will put pressure on prices. I’m not suggesting that there will be a lot of runaway results, but the shortage of stock will be the key factor in this market coming into autumn and winter.”
He says what normally occurs in autumn and winter is that a reduced number of homeowners are prepared to sell. The few who do list good-quality, A-grade properties then start to achieve outstanding results. This, in turn, prompts a much larger number of vendors to come onto the market from early-spring onwards.
“The real test of the Melbourne market is in spring, but autumn and winter will probably show very healthy sales results,” Mr Staver says.
Macroeconomic factors continue to bode well for real estate transactions.
The Consumer Sentiment Index is stable, rising slightly in December, and the Reserve Bank has maintained the official cash rate at 1.5 per cent for the past 32 months.
Additionally, Victoria’s population increased by 138,000 in the 12 months ending June 2018, and the state’s unemployment rate is well below the national average of 4.5 per cent.
Some market watchers argue that the housing market is just one or two interest rate cuts away from a full recovery.
Up to two interest rates cuts this year are forecast by a growing number of economists.
Meanwhile, Reserve Bank governor Philip Lowe has said that the housing market will not “derail” the Australian economy.
If you would like to discuss any real estate matter, please contact your nearest Nelson Alexander office.