Melbourne Market Insight - Winter 2011

Posted on 26-Aug-2011 by Hugh Jones

Reviewing the trends from the last quarter

As the Melbourne property market heads into what is traditionally the slowest season of the year, the softened conditions we’ve witnessed in the first quarter of 2011 are continuing. Property prices and clearance rates are down to levels we haven’t seen since the GFC. Stock levels across the state continue to rise as vendors list properties despite the onset of winter and the flat market conditions. Recent figures suggest stock levels in Victoria are 41% higher than this time last year with more than 53,000 properties currently up for sale.

As more properties come onto the market and buyers become increasingly selective, we’re seeing a general trend across Melbourne where properties that failed to sell at auction go on to stagnate in the private sale market. The average time it’s taking to sell a property via private sale has now increased to 88 days, whereas it was just 60 days in December last year. The unfortunate reality for vendors whose property has passed in at auction is that these properties are more challenging to sell afterwards – and most will sell for significantly less.

Generally speaking, family homes up to $4M continue to perform reasonably well, as do single-fronted properties and art deco apartments in quality locations. In terms of apartments, there are still good opportunities for investors, particularly those in well-located 1960s and 1970s blocks. Vendors need to be fully aware of market conditions and we’re discouraging our vendors from listing their property unless they have a very compelling reason to do so and they’re planning to re-invest in the current market. Vendors need to consider all reasonable offers and make sure a contingency plan is in place if the sale doesn’t go as hoped. Vendors who are upgrading or selling their ‘empty nest’ would be well advised to sell before buying another property. Overall, our advice is for vendors to sit tight and re-evaluate in spring when the market settles. The rental market is moving but landlords should not expect significant increases in rent over coming months, particularly as construction finishes on a significant number of ‘off the plan’ properties which will flood the market over the next eighteen months.

Another point to note is that the state government’s stamp duty reductions for first home buyers will begin to take effect in July. I suspect this won’t have a huge impact on the established property market but its influence may be felt in the house and land package areas and new home construction sector. Current market conditions make it a great time to upgrade your home – but not an ideal time if you’re thinking of downsizing.

Hugh Jones – Director