As we tick over to August and await another interest rate drop, new housing data for the preceding month is once again filtering through.
Firstly, RP Data and Rismark have released their July “Hedonic Home Value Index Results” assessing a rise of a 1.6 per cent in capital city dwelling values for the compounding four week period. This further strengthens the 1.9 per cent gain in June taking R P Data’s figures to a 6.5 per cent cumulative ‘recovery’ since the trough of May 2012.
For Melbourne the change is 2.3 per cent for July, 2.4 per cent for the quarter and year on year 4.3 per cent.
I pointed out last week – results can be as misleading, as they are informative and although it’s anecdotally evident ‘on the ground’ that prices have significantly improved since the end of 2012, playing a game of exact percentages is by no means an accurate science and certainly no guide to an individual property price.
However, probably due to the fact that it’s the last to be released and therefore has opportunity to gain benefit from the largest collection of lagging data, the ABS June quarterly house prices are due out tomorrow and will no doubt reflect a similar upward trend in market movements – along with a few revisions to the previous months numbers.
With this in mind, few things are happening to our housing market which are worthy of mention. The marginal upward trend in building approvals evident since the low of 2011, has been moderated with the latest ABS figures showing new houses and apartments falling -6.9 per cent over June (seasonally adjusted) – posting their third large fall in the past four months.
Even allowing for the usual volatility of short term data, this is low by historical standards and falls short of RBA forecasts prompting an almost foregone conclusion that the RBA will cut the interest rate by another 0.25 basis points tomorrow.
In contrast the established market is enjoying an investor lead rally as funds are increasingly shifted from cash into residential real estate with 36 per cent of loans going to this sector alone.
In May of this year, 18.4 billion worth of housing finance for investment purposes was committed to – the highest level since January 2008. Prices in Sydney, Perth and Canberra are now reportedly back to their previous peaks – and with the cash rate set for a further fall to 2.5 per cent, it could be argued, that we haven’t even started to touch the surface. As reported a couple of weeks ago from the new “SMSF Professional’s Association of Australia and Macquarie Bank” according to the ATO, between 2006 and 2013, SMSF property assets grew in value by 230 per cent – ‘a higher growth rate than any other asset class.’
Ahead of the hugely popular auction episode of ‘The Block,’ the REIV commented that the result could not be taken as a reflection of the current market. However, I attended the auctions on the day, and the buoyant competition that was clearly evident from those bidding, was not at all at odds with what we’re currently seeing ‘on the ground’ in inner and middle ring Melbourne localities.
If you have a sensible head on your shoulders, and think it somewhat bazaar that a buyer would pay around 1.5 Million for a three bedroom apartment that has four bathrooms, five toilets – with some hefty owners corporation fees thrown in for good measure, along with fixtures and fittings which are ‘arguably’ dramatically overcapitalized for the property type – when the same dollars could purchase a renovated period terrace in one of the better streets of Albert Park, Middle Park or South Melbourne then you get a small sense of some of some of the crazy activity Ive witnessed of late.
Whilst a drop in rates may assist lowering the Aussie dollar, which will have a positive impact in the longer term, GDP growth is slowing and as we’ve seen over the past 12 months, as a tool, interest rates are limited in their effectiveness to stimulate those sectors of the economy most in need – and with no opportunity to leverage a higher rate of interest on cash savings, yield seekers are sourcing other ways to gain on their dollar – a larger proportion of which is being channeled into property.
Rental rates have inflated strongly since 2007 – RPData estimate a cumulative rise of 32.1 per cent. However, having had the greatest impetus of supply side growth over the previous 5 years or so, Melbourne’s vacancy rate sits around 3 per cent which has made the atmosphere competitive for rentals. The yield for an apartment is currently around 4 per cent – and houses around 3.8 per cent.
Whilst the number of properties on the market nationally has fallen 2.1 per cent in July and 2.5 per cent over the year, the number of listings in Melbourne is elevated. Albeit, there is a sharp difference across the suburbs – with the larger surplus of properties in the outer regions and good quality listings in the inner and middle ring suburbs reducing. This divergence is helping fuel some of the pent up demand we’ve seen of late, which has fed directly into boosting established prices.
Melbourne – and the macro environment as a whole – will present some challenging headwinds as we navigate past the Federal Election in September. I would therefore caution all buyers to avoid temptation to ‘rush in’ under the impression that we’re into another ‘boom’ phase of the cycle – instead it’s important to keep a wider long term perspective front of mind prior to embarking on negotiation.
Catherine Cashmore
| Clearance Rate: | 74% | ||
| Total Auctions: | 515 (22 unreported) | ||
| Sold: | 383 | Passed in: | 132 |
| At auction: | 308 | Vendor Bid: | 73 |
| Before auction: | 73 | Real bid: | 59 |
| After auction: | 2 | ||
| Total Private Sales: | 522 | ||
| Weekly Turnover: | 905 | ||
| Source: www.reiv.com.au | |||
The NPB clearance rate is representative of the results evidenced in the ‘quality’ end of the marketplace. We take the results from a range of suburbs; however please note we are not ‘suburb specific’. NPB Melbourne, negotiate on hundreds of properties for their clients each year throughout all areas of Melbourne and the Bellarine Peninsula. The properties we highlight are taken from a selection which we carefully analyse for quality assessment and revise daily.
NPB’s clearance rate moving in line with REIV data – however it should be noted, the quality and quantity of ‘good’ listings are slowly reducing as we approach winter and it’s expected this could increase competition.
| NPB Clearance Rate: | 91% | ||
| Total Auctions Reviewed: | 45 | ||
| Sold: | 41 | Passed in: | 4 |
| Under $600k: | 16 | 2 | |
| $600k-$1m: | 13 | 1 | |
| $1m+: | 12 | 1 | |
Why is the NPB Clearance Rate always higher than the REIV Clearance Rate?
The NPB clearance rate is a snapshot of ‘investment grade’ or ‘cream of the crop’ properties representing only those we recommend to clients. These are properties that hold the best potential for a long term capital growth and rental demand. Whilst the Real Estate Institute of Victoria include all properties scheduled for auction (as reported by their members) – including those that are poorly located and unlikely to attract demand even in a robust climate; our clearance rate is far more representative of the market that represents our client’s best interests. It’s an important part of how we assess the best negotiation strategy for your needs.
The full list of the 45 properties reviewed by NPB this weekend:
| Suburb | Type | Beds | Quote | Result |
| Glen Iris | Apartment | 1 | $320k+ | SOLD $360,000 |
| Essendon | Apartment | 2 | $330-$360k | SOLD $367,500 |
| Reservoir | Unit | 2 | $300-330k | SOLD $374,000 |
| Brunswick | Apartment | 2 | $350-380k | SOLD $378,000 |
| Ascot Vale | Apartment | 2 | $340-370k | SOLD $387,000 |
| Montmorency | House | 2 | $380-420k | PASSED IN |
| Carlton | Apartment | 1 | $395k+ | SOLD $395,000 |
| Bentleigh | Apartment | 3 | $370k+ | SOLD $412,000 |
| Nunawading | House | 2 | $370-410k | SOLD $450,000 |
| Coburg | Apartment | 2 | $390-430k | SOLD $465,000 |
| Prahran | Apartment | 1 | $400-440k | PASSED IN |
| Newport | House | 3 | $450-490k | SOLD $520,000 |
| Balwyn | Unit | 2 | $390-420k | SOLD $525,000 |
| Caulfield | Unit | 2 | $420k+ | SOLD $535,000 |
| Coburg North | House | 3 | $490k+ | SOLD $550,000 |
| Prahran | Apartment | 2 | $510-565k | SOLD $567,500 |
| Northcote | House | 2 | $480-520k | SOLD $570,000 |
| Nunawading | House | 2 | $480k+ | SOLD $585,000 |
| Sold | 16 | |||
| Passed In | 2 | NPB Clearance Rate 88% | ||
| Total | 18 | |||
| Suburb | Type | Beds | Quote | Result |
| Ringwood North | House | 4 | $480-520k | SOLD $601,000 |
| Coburg | House | 2 | $540-590k | SOLD $605,000 |
| Mitcham | House | 3 | $500k+ | SOLD $642,000 |
| Coburg | House | 3 | $590-640k | SOLD $696,000 |
| Brunswick | Warehouse | 3 | $600-660k | SOLD $710,000 |
| Heidelberg Hghts | House | 3 | $580-640k | SOLD $712,000 |
| Melbourne | Apartment | 3 | $650k+ | PASSED IN |
| Brighton | Townhouse | 3 | $700k+ | SOLD $743,000 |
| Richmond | Townhouse | 3 | $800k+ | SOLD $865,000 |
| Thornbury | House | 3 | $640-700k | SOLD $873,000 |
| Richmond | Townhouse | 3 | $750k+ | SOLD $901,100 |
| Richmond | House | 2 | $750k+ | SOLD $902,000 |
| Brunswick | House | 3 | $700-770k | SOLD $915,000 |
| Preston | House | 4 | $800k+ | SOLD $925,000 |
| Sold | 13 | |||
| Passed In | 1 | NPB Clearance Rate 92% | ||
| Total | 14 | |||
| Suburb | Type | Beds | Quote | Result |
| Balwyn North | House | 3 | $850-930k | SOLD $1,000,000 |
| Bentleigh | House | 4 | $800k+ | SOLD $1,005,000 |
| Elwood | Apartment | 3 | $1m+ | SOLD $1,200,000 |
| Doncaster East | House | 5 | $800-880k | SOLD $1,227,500 |
| Fitzroy North | House | 3 | $1m+ | SOLD $1,250,000 |
| Brunswick | House | 4 | $1.1-1.2m | SOLD $1,303,000 |
| Richmond | Warehouse | 3 | $1m+ | SOLD $1,345,000 |
| Malvern East | House | 5 | $1.5m+ | SOLD $1,610,000 |
| Ashburton | House | 4 | $1.5m+ | SOLD $1,660,000 |
| Hampton | House | 5 | $1.6-1.7m | SOLD $1,780,000 |
| Brighton | House | 5 | $1.8m+ | SOLD $1,928,000 |
| Glen Iris | House | 5 | $1.7-1.8m | SOLD $1,951,000 |
| Armadale | Townhouse | 4 | $2.5m+ | PASSED IN |
| Sold | 12 | |||
| Passed In | 1 | NPB Clearance Rate 92% | ||
| Total | 13 | |||
| Sold | 41 | |||
| Passed In | 4 | NPB Clearance Rate 91% | ||
| Total | 45 | |||
CONTACT US
If you need any assistance with searching, assessing or negotiating your next property purchase or simply wish to discuss your property buying needs, please don’t hesitate to contact us. Alternatively, you can complete our online Help Us Help You form and we will contact you.
Regards
Antony Bucello and Catherine Cashmore
