Melbourne Market Insight - Autumn 2011

The 2011 property year is off to a steady but unremarkable start, and there’s no doubt that the market has softened over the last quarter. Though we won’t know the true strength of market performance until auction season is in full swing, early signs are that the first quarter will be characterised by moderate but unexceptional property prices.

Stock levels are looking good, with many new listings hitting the market, but prices and clearance rates are softer than this time last year which puts buyers in a strong position. Open for inspections are being well attended and buyer enquiries are high but buyers seem to be quite prepared to wait for the right property at the right price. Whereas agents might have had multiple buyers for a single property this time last year, at the moment they’re having to work harder to attract one or two serious buyers.

The devastating floods and wild weather we’ve experienced across the country has seen a huge increase in demand for trade services nationwide. This surge will put upward pressure on trade fees and service availability, which means 2011 won’t be a good year to embark on major renovations. We’ve witnessed this firsthand with the storms that damaged 37 of our rental properties. The experience has highlighted not only the difference in pay outs and excesses between insurers, but also their responsiveness – all factors that have a significant impact not only on landlords but also property managers in terms of cost and management. Though we’re unable to make policy recommendations to our landlords, we’re happy to provide recommendations based on customer service and responsiveness.

The rental market

Despite some mixed opinion in the media recently, the rental market is softer than this time last year, with vacancy rates higher in the last twelve months. Rents are steady but big leaps in rental returns are unlikely in the short-term. We’re seeing an increase in the number of days rental properties remain vacant, and a rise in the number of open for inspections necessary to secure tenants. During this time where the market has clearly softened, our advice to landlords is to hang onto good tenants wherever possible.

Commercial property

First tier retail strips such as Glenferrie Rd and Chapel Street, continue to sell well as commercial buyers look for quality investments, despite concerns that rental returns are comparatively low with many Australian retailers under pressure. Fortunately, here in Australia, commercial rents didn’t fall much during the GFC whereas other countries experienced big drops from which they are still struggling to recover. Industrial sales are weaker with sales being increasingly dependent upon the quality of the premises and the tenant in situ.
 

Suburbs to watch

East St Kilda remains a well-regarded suburb and is relatively undeveloped compared to surrounding suburbs. It’s still possible to pick up a house or worker’s cottage at a decent price within walking distance to the increasingly popular Carlisle St shopping strip. Prahran offers good buying opportunities for established apartments and Richmond again is
becoming a hot spot for houses as good quality apartments become increasingly difficult to find in the area, amongst a
general pool of poor quality properties.

We trust you’ll enjoy the articles and stories we’ve compiled in this Autumn edition of our newsletter and if you're thinking of upgrading your home or buying an investment property, now is the perfect time, so contact us for advice on 9827 3355.


Hugh Jones – Director