Why I’m Not Worried about a Property Downturn

Source:REIV

Melbourne Market Wrap March 25th September, 2017

Congratulations to Richmond for winning the Preliminary Finals and ensuring the AFL Grand Final does not become an interstate affair. Melbourne will once again come to life this Friday for the Finals Parade and on Saturday when Richmond play Adelaide in this year’s Grand Final. Expect a much quieter auction weekend.

The REIV reported 987 properties auctioned this weekend versus 1121 last week and 970 for the same time last year. The clearance rate was 75% which is in-line with last week’s result of 74% and slightly less than the 78% recorded last year for the same time.

Melbourne’s auction clearance rates have been steady in the past month and showing no signs of this market strength slowing down.

The suburbs with the most auction activity over the weekend were again Reservoir, Briunswick, South Yarra, Preston and Richmond.

Areas like Doncaster and Templestowe, Box Hill, Blackburn and had a noticeable number of properties pass in over the weekend. Whether this is linked to the “Chinese Hot Money” or not is yet to be seen but there certainly has been a noteable change in this market.

“A Grade” properties seem to be getting all the attention from buyers and seeing big results at auction. As more properties come on the market buyers appear to have more choic. Sentiment is seeing a swing away from sellers and beginning to favour buyers.

In our advocacy work this week we managed to secure the sale of two properties for our clients this week. One was a substantial development site in Oakleigh in an off market sale which we marketed quietly to our database of buyers. A great result for the vendors!

Thinking of buying or selling a home?

Visit our Street Advocate website or send an enquiry below or just call

Peter Sarmas on 0418 740 606

Source: MCG

Why I’m Not Worried about a Property Downturn

When you start seeing a downturn in an economy which has been powered by a very strong property market there are usually some alarm bells ringing but the powers that be seem to have planned for a downturn and expect a transition to infrastructure spend over the next three years.

I know I touched on this in the last newsletter but it is really important to emphasise why I believe this economic exit from the property sector will not be a disaster.

Most of the media’s has been on negatives such as household debt, weak consumer sentiment  and low wages growth.

No doubt, these signs are worrying for any economist let alone the Reserve Bank Governor who’s job is to guide our economy through potential downturns like the GFC.

In a presentation last week Governor Lowe outlined the size of the infrastructure work yet to be done in 2017, about $100 billion. This figure is set to rise and peak three years from now in 2020.

To get some idea of the size of this spend, Commsec’s Craig James says this infrastructure spending is likely to be comparable or larger than what was invested during the resources boom of the past 15 years.

He believes this infrastructure spend is the key reason the Reserve Bank has forecast such a strong growth in GDP (3 per cent). On the back of this new government spend there is an expectation the employment market will remain strong and perhaps even tighten in the construction sector, pushing wages higher.

Making forward predictions on anything comes with risk but I wouldn’t bet against the RBA which has been responsible for Australia’s 25 years of economic growth.

An economy with full employment and spending consumers is less likely to see a collapse in asset prices like property. No doubt there will be some corrections in certain markets, especially those who have bought Off the Plan Properties in their super and can no longer hold the property due to banks changing their loan from Interest Only to Principal plus Interest. Many holding these type of properties or what I call “B and C Grade” are already seeing significant losses. But this does not mean the whole property market will collapse.

We are also witnessing a transition from buying property to renovations which is again common after a strong growth cycle. Banks and lending institutions are currently tripping over themselves to find a way to lend money to home owners with plenty of equity.

So when making your next decision to buy or sell property make sure that it is a well informed one. Always buy quality in blue chip areas.

Speak to you bank manger/broker, accountant and financial planner and of course a highly qualified Property Advisor, ask for their opinion it should cost you nothing! You already know what my view is!

Finally try to always keep in mind that if something looks too good to be true it usually is! There is no quick fix in life unfortunately.

Thinking of buying or selling a home?

Visit our Street Advocate website or send an enquiry below or just call

Peter Sarmas on 0418 740 606.