Melbourne Auction Results – August 25, 2014

Is The Melbourne Property Market Suffering Fatigue?

Over the weekend I managed to get away for a week with the family to lovely Palm Cove.

If you’ve never been to this part of the world, I thoroughly recommend it – a beautiful 27 degrees every day. Just perfect!

Despite being away, most of you who follow me on Twitter would have kept up to date with the latest property market stories. I even managed to close a deal over a two day period, which I’ll discuss a little later in this article.

Photo: Terrazzo

What Happened In The Melbourne Property Market This Weekend?

According to the REIV, there were 613 properties auctions, which resulted in a clearance rate of 71 per cent.

This is down from last week’s 73 per cent and last year’s 79 per cent clearance rate. Is the Melbourne property market beginning to show signs of fatigue?

The general consensus from what we are hearing and seeing on the ground is that the Melbourne market is far from even. Some properties are attracting 50-plus buyers and multiple bidders, while others aren’t attracting any bidders at all.

“Due diligence is forming a major part of the decision-making process.”

It’s all about the quality of property and area at the moment. Should we continue to see this strength in quality homes leading up to the Grand Final, we could expect a strong spring, which could run until mid-December at least.

Buyers are becoming very educated due to the abundance of free online information. Using advocates to search, conduct due diligence and negotiate on properties is also becoming a growing trend.

With Melbourne median house prices hovering at a record $658,000 (REIV) plus stamp duty, most buyers are taking their financial commitment very seriously. As a result, due diligence is forming a major part of the decision-making process.

New Apartments Are Having An Impact

It’s worth noting the impact new apartments are having on the Melbourne property market. While scanning the results section in The Age, I noticed a number of units failed to sell in areas previously held in high regard for capital growth. Buyer beware.

Is this the first sign that the apartment market is beginning to falter? Perhaps. According to Louis Christopher of SQM Research, vacancy rates are being affected by an oversupply of new apartments around the country.

“Buyers are becoming very educated due to the abundance of free online information.”

As he points out, these are properties built for investors, not home owners, so they have different attributes. I believe they represent a different segment of the property market.

However, there is no doubt that this oversupply is also impacting established properties, which offer tenants a similar living environment for the same or lesser weekly rent.

In happier news, Melbourne has been judged the World’s Most Liveable City for the 4th year in a row, after outperforming 139 other cities. It achieved a perfect score in healthcare, education, sport and infrastructure. 

This comes hot on the heels of the announcement that Melbourne had also been voted the World’s Most Friendliest City in a survey by Conde Nast Traveller magazine. What a great reason to celebrate, Melburnians!

Photo: Lewis Clarke

Why The Property Market Has Been So Strong The Past Decade: Household Formation, Not Population, Driving Demand

Last week I read a very interesting article by demographer Bernard Salt from KPMG.

It seemed to dispel every theory we’ve had about why property prices have increased over the past decade, particularly in Melbourne, Sydney and Brisbane.

And to everyone looking to grab a headline with property bubble talk, overvaluations and lack of affordability, it’s actually a lot simpler than that – according to Mr Salt, this demand has more to do with the way we form households in our population.

“Household formation… has outstripped population growth more or less every year for the last decade.”

He claims that 92 per cent of the Australian population live in private occupied dwellings.

As of December last year, there were 8.425 million private occupied dwellings in Australia, up 149,000 or 1.8 per cent over the previous 12 months.

At a national level, household formation is tracking an annual growth rate of 1.8 per cent, which is marginally faster than the rate of population growth (1.7 per cent). This is good news for the property industry. The demand for housing is just outstripping population growth.

“Household formation, or more correctly growth in private occupied dwellings, has by my calculations outstripped population growth more or less every year for the last decade,” Mr Salt says.

“Separations and divorce; the rise of widowhood; 20-something Generation-Ys leaving home to live in an apartment are all social drivers of demand for household formation. These demographic and social shifts have steadily lifted the demand for housing over the past decade and probably for much longer.”

Street Advocacy News: Buying & Selling Property With Street News

The purchase I made for my client this week was a very challenging one.

I have been working with a major client since February this year looking for a specific type of development property. This client is closely connected to a number of high net worth Chinese individuals looking to invest in the Australian property market.

My brief was to make contact with my real estate network to find any substantial parcel of land with plans and permits in a quality location.

After many weeks of searching, we narrowed the search down to half a dozen sites for presentation.

Last week I was involved in what was the biggest negotiation of my career. After a number of days, the client managed to purchase a multimillion dollar site. Both my client and his Chinese contact were very pleased to have bought what will be an icon development in Melbourne’s south east precinct.