Apartment Danger Zones in Melbourne

Source:REIV

A total of 731 properties went under the hammer over the weekend, well below the 995 auctions for the same weekend last year. The Domain Group reported a clearance rate of 74 per cent, indicating the market is steady and in some parts very strong.

Domain Group data shows that between February 1 and this week 12,109 auctions were held, while in the same period 12,314 properties were auctioned.

Marshall White’s director John Bongiorno capturing the essence of how the Melbourne property market is tracking

“Results over the last couple of weekends (including today) have been up on recent weeks – where our average number of bidders at auction has strengthened and even numbers coming through open for inspections is also again up.

The only worrying factor looking ahead is, as we experienced back in the first quarter of the year, the number of new properties coming on to the market is looking well down on last year,  which is not good news for buyers who have missed out on auctions today and over the last few weekends.”

I also expect the supply of property to be low at least until and including August. There are a number of real estate agents expressing concerns over a quiet winter period with very few auctions being booked for August.

It also may be that potential vendors are holding tight until the dust has settled from the election before making their decision to sell. The big danger facing potential sellers going forward is should there be a concentrated supply of property come on the market this Spring as I expect, vendors could face substantial price losses.

We’ve had some big results over the past month with vendors selling. We would encourage potential vendors to reconsider and bring their selling plans forward to capture some of the current strength in the market.

Source: Shuttesrstock

Roger Montgomery Predicts Property Bust!

Another spruiker another prediction that property prices in Australia will go bust. This time its stock picker and fund manager Roger Montgomery who beleives the Australian property market is heading for a collapse, the magnitude of which triggered the GFC in the US.

The basis for his argument, an oversupply of apartments shown by the ABS data. Core Logic last week released their Settlement Risk report which confirmed the huge number of apartments expected to settle over the next 24 months, some 231,000 Australia wide. Melbourne and Sydney are the two biggest cities which expect settlements of 80,000 each during that time. Absorbing this amount of stock could become more of a problem for Melbourne than Sydney due to it’s already oversupply issues.

To his credit though, Mr Montgomery was also quick to point out Australia has much stricter subprime lending and borrowing standards than the United States and things like employment, inflation expectations, interest rates, debt-to-income ratios, house-prices-to-income all influence short-term property prices. Sadly these important differences were a foot note to the story rather than the main focus.

These are real concerns for our property market, but whether this means we are all about to become homeless overnight, I’m not so sure based on the current market clearance rates and tight supply issues in Melbourne.

Many buyers shopping for property in the current market would be oblivious to such dangers or are just not concerned. That is how big a difference there is between the apartment market versus the house and villa/townhouse market at the moment in Melbourne. The latter segments are very strong for A Grade properties with investors, first home buyers, down-sizers and upgraders all vying to buy in.

The following are what we see as ‘danger zones’ for the next 2 years in Melbourne. Around Australia there are 10,000 apartments being built per month.

SA3 Regions in Melbourne with the most expected completions over the next 12 and 24 months

Melbourne City 5,276, 14,353

Port Phillip 1,296, 4,270

Boroondarra, 1,676, 4,227

Brunswick – Coburg 1,435, 3,861

Yarra 1,266, 3,561

Whitehorse 1,366, 3,443

Manningham 1,271, 3,065

Darebin 1,248, 3,008

Glen Eira 821, 2,965

Maribyrnong 676, 2,951

Stonnington 705, 2,716

The Housing Dilemma that no one talks about

Please refer to the graph below. Yep, as a percentage the number of properties being built by Government for the public sector has been plummeting since 1985 according to Core Logic.

To minimise the apparent risk to our economy APRA, over the past 12 months has effectively reduced the number of investors borrowing money to buy an investment property. The only problem is with current record low building levels by government, who is going to provide rental accommodation in the coming years? In particular, affordable accommodation with good infrastructure and access to employment opportunities.

There seems to be a huge disconnect between the type of property and its location required and what is being built.

Core Logic

What our Clients Are Saying?

We would like to thank you for all your hard work, your advice and your attention helping us to secure an excellent investment property.  Being first time investors, you were happy to spend time with us explaining how it all works and always happy to answer our many questions. You sorted through lots of properties according to our brief to finally secure a fantastic place in a great location and at an excellent price. You made negotiating with the vendor’s agent a breeze and your knowledge of the industry and players was a huge advantage.  All in all, we are so glad we had you as our advocate for this purchase and we hope that we can work with you again in the future. Peter and Jenny.

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