Melbourne Auction Results – May 19, 2014

Melbourne Auction Market Shrugs off Budget Cuts

For those following my weekly market wraps would recognise that there has been a genuine concern surrounding the Coalition’s Budget cuts released last week and how they could potentially impact the property market.

With consumer sentiment falling in April and a tough Budget released to pay for Labour’s mismanagement of the economy, I predicted a clearance rate below 70 per cent over the weekend.

But after early results can we be sure whether this happened or not?

“For those of you who might have missed it, the Budget brought some changes that are certain to impact the property industry both positively and negatively.”

Prior to the weekend it was reported that we could expect 976 properties to be put up for auction. From the latest results released by the REIV a clearance rate of 72 per cent was recorded from 863 auctions, this is down from 74 per cent reported on Saturday.

I expect this figure to continue to decline once more results are gathered as 115 are still unaccounted. Therefore, the final figure could very well be under the 70 per cent mark, which is more in-line with my expectations.

What the Budget Brought for Real Estate

For those of you who might have missed it, the Budget brought some changes that are certain to impact the property industry both positively and negatively.

Firstly the scrapping of the NRAS (National Rental Affordability Scheme), is set to have the biggest impact on the housing industry as a number of developers used this scheme as an incentive to sell their projects to investors.

Melbourne Auction Market Shrugs off Budget Cuts
Source: Steve Davidson/Flickr Commons

The second and to me the most interesting outcome of the budget was the announcement of the proposed Debt Levy Tax which is squarely aimed at high income earners.

Property analysts are already predicting that this may affect the top end of the property market and may see many of the wealthy turn to negative gearing as a means to minimise their tax. What the Treasurer avoided tampering with was negative gearing, which is a relief for many.

The RBA Makes a Stament on the Housing Market

In a recent statement on monetary policy the Reserve Bank of Australia revealed that household wealth had increased by 10 per cent for the first month of this year, “driven by higher equity and housing prices”.

This increase in wealth appears to be incresaing demand from investors and upgraders, the two strongest drivers of the Melbourne property market. According to RP Data, Melbourne house prices were up 11.7 per cent and Sydney was up 16.8 per cent for  the past 12 month –ending April 30.

The RBA noted an increased turnover of property sales and more importantly vendor discounting is at near 10 year lows. The RBA also mentioned that the demand for new dwellings continued to strengthen and demand for city apartments from foreign investors remains strong.

What are Real Estate Agents Saying on the Ground?

My first instinct when something doesn’t quite go according to my expectations is to get a pulse from the real estate agents on the ground.

I spoke to a number of agents over the weekend to get an idea of what was actually happening. In this mix I have thrown in my opinion and experience during my search in the Port Melbourne area on Saturday.

Port Melbourne
Source:Wikipedia

In the East, the Manningham area has been performing very strongly for a number of months now.

Tony Tuccitto from Barry Plant Doncaster reported a slight change over the weekend, “The clearance rate over the weekend was still high (selling 4 from 5) however we did notice that numbers through our opens slightly down and bidders were also lower than have been the past few weeks. Having said that we still achieved some very good results.”

Inner city real estate agent, Edward Hobbs was far more positive about Richmond and his surrounding suburbs, selling 7 from 8 auctions on  Saturday in front of good crowds and multiple bidders.

My first instinct when something doesn’t quite go according to my expectations is to get a pulse from the real estate agents on the ground.

Yet, this is not an accurate reflection of the area. After a closer look at the results from APM over the weekend, it’s evident that seven properties have been passed with one withdrawn out of the 20 reported –reflecting  a clearance rate of 60 per cent.

As for where i was over the weekend? Searching for apartments and townhouses in Port Melbourne for a client looking to downsize to an inner city lifestyle. I noticed there were a number of properties within a short proximity of each other open for inspection. Accordingly, the same buyers were going from one open to the next.

This highlighted the impact supply and demand can have on an area as well as the importance of quality properties. Numbers in general were low and first home buyers appeared to be the main players in this sub $600- $650,000 price bracket.

We Turn to This Weekend

More than 9,000 properties have so far sold this year up a whopping 2,000 for the same time last year. The REIV expects another 2,500 more properties to be auctioned over the next two weekends in May. So if you are looking to bag yourself a property this could be the last opportunity before the Spring season.