Melbourne Auction Prices Fetching Above Price Guides

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The housing market in Melbourne is starting to relax into a pattern of relative consistency. Last week’s clearance rate was reduced to 68 per cent once all results had been collected. This week, a clearance rate of 66 per cent was recorded. For the year to date we’re still holding steady at 69 per cent.  

As mentioned previously, the clearance rate is a good indicator of the relative heat in the inner and middle ring suburbs. Most properties located close to the CBD are opting to sell using the auction method.  

The clearance rate tends to follow median rises and falls relatively consistently with the CR leading the way ahead of a modest change house prices.  When it tips over 70 per cent, prices tend to trend higher. We’re currently hovering a little below this level. It’s fair to assess most properties are selling within their expected price range, albeit at stronger levels than experienced at the end of last year. There is the odd boom result for those properties that stand out.

A greater number of properties are selling above the quoted ranges. An analysis of 142 auction results between February and late March recorded by National Property Buyers showed 118 properties sold above the upper bracket of the price guides provided by agents before auction.

Of those 118 properties, 43 sold for more than 10 per cent above pre-auction price guides. Those that sold above the price guide were 9.55 per cent above the upper price guide bracket on average.

It’s not unexpected to see selling agents remaining cautious in light of the sudden and strong increase in turnover – they may doubt its longevity. However, this is a trend we’re noticing with some frequency of late. Therefore ‘quoting low’ remains an unfortunate reality buyers must battle against.

The Melbourne market currently has a healthy supply of stock, which is helping to keep prices constrained.  The latest March data shows listings are up 0.2 per cent compared to this time last year, and 1.7 per cent month on month.  Although home buyers may struggle to find suitable accommodation for their intrinsic needs, investors are awash with options. Interest rates are low and there is the possibility they will fall further, so investors remain in the box seat.

A recent ASIC review reported that SMSFs are the fastest growing sector of the superannuation industry. The proportion of assets held by self-managed super funds have increased two fold – from 15 per cent in 2000-01 to 31 per cent in 2011 and 2012.  Unsurprisingly, one fifth (18 per cent) of SMSFs have borrowed against property, prompting calls for the property industry to be regulated to protect against developers taking advantage of this sector to push sales.  

The median price for a SMSF property acquisition is $350,000, which is also the typical amount first time buyers borrow when purchasing a home. Both sectors, along with second time buyers, tend to prefer inner and middle ring established apartments. Consequently, it’s inevitable that the greatest growth in property prices year to date has been in these regions.

REIV data shows suburbs such as Brighton, Balwyn, Balwyn North, Northcote, Doncaster and Camberwell all producing strong first quarter returns in housing prices and Toorak, Kensington, Kew, Cheltenham, Boronia and Bayswater leading the way in unit median price rises, though it should be noted that REIV unit data covers all attached stock, including townhouses.  

This weekend the REIV expects around 780 auctions.