Spring has sprung
Blogger: Sadhana Smiles, CEO, Harcourts Victoria
We are well and truly into the spring selling season and for most of us it has had a great start. The elections are finally over, interest rates are at the lowest levels and consumer confidence certainly seems to be on the up with high clearance rates.
However, there does seem to be a stock shortage and buyers' focus is on stock that is well priced. Agents and vendors must avoid overpricing properties based on high clearance rates. We are certainly not in any boom market. The market is strong and the demand is there because there is a shortage of properties. What we are seeing is the market shift at a steady and sustainable pace.
I was recently flicking though the Marie Claire magazine at the hairdressers and I came across an article with some interesting stats on the Australian property market, which I thought I would share with you.
In the boom market of 2009, there were 101,000 sales across the city, according to the Real Estate Institute of Victoria (REIV). In 2010, 90,900 properties changed hands, and in 2011 there were 76,400 sales.
Last year, total Melbourne sales fell to 70,700, while in the seven months to July this year there were 44,000 sales.
Over the last 21 years, we have seen strong economic growth in Australia, duel income households combined with low interest rates has meant that we have had more money to spend and the impact was an increase in house prices in sought-after areas.
In 1970, the average house price was $12,500 - about three times the typical income.
In 1990, the average house price was $125,000 - about four and a half times the typical income.
And in 2013, the average house price is $420,000 - about six and a half times the average income.
Interestingly, in 2001 more than half the suburbs in Australian capital cities were classed by experts as affordable to buy into. Now it is less than five per cent, and they are no longer inner-city suburbs.
Australian house sizes have grown from 130 square metres to 250 square metres, with more people deciding to rent. In fact, people will be renting for longer periods of time, some as long as 10 years or more.
Thirty years ago, the typical household was four-plus people; now it is two and a half.
So where are the current hotspots in Melbourne according to the experts?
Suburbs with growing populations tend to be the ones with great transport connections to Melbourne via rail or road, and infrastructure such as schools and shops.
Some of these suburbs are Frankston, which is seen as an affordable bayside suburb with a median house price of around $300,000 and units at $260,000. Property prices are rising by around seven per cent per annum.
Epping, Thomastown for the same reasons are also seeing significant growth. It is popular for investors and first home buyers
Berwick has seen an average growth of house prices of 6.5 per cent per annum, and the suburb has great employment opportunities with Casey Hospital, Monash University and TAFE.
We are starting to see an increased number of people attending auctions and registering to bid, creating competition.
Clearance rates are starting to sit at just at or above 70 per cent, with 21 per cent of all sales auctioned compared to 16 per cent this time last year (source: REIV).
Victoria is still seen as a very liveable city - our unemployment rate is lower than the national rate and we have added close to 1,400 new jobs, all of which add to a sustainable market and consumer confidence.
The Reserve Bank (RBA) has decided to keep the cash rate steady at 2.5 per cent for the second month in a row, and it’s lowest in 53 years. The next meeting will be in November.
The decision to not to change the rates was predicted due to increase in consumer confidence and the recovery in the market.
So what does all this mean to an agent? The market is steady and stable, consumer confidence is rising, buyers are on the market, investment is up and as long as we price property correctly, we should see a healthy spring season.