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One of the franker network CEOs has echoed that the national market is in a period of adjustment, and that vendors and buyers both need to moderate their “super cycle” expectations.
“The current reduction in auction clearance rates reflects this adjustment phase, with a high proportion of properties selling post-auction,” The Agency CEO Matt Lahood said in his latest Property Report.
“It is a matter of listening to market feedback and referencing recent comparable sales as a current price indicator, not a starting point for price expectations.”
Mr Lahood said that over the last quarter, Australia’s national market recorded a fall of 0.3 of a percentage point.
“Sydney and Melbourne both experienced minor drops in value and the remaining capital cities recorded minor increases or no change. In the month of May, we saw similar movements, with the average value of dwellings nationally falling by 0.1 [of a percentage point] and the combined capital cities average falling by 0.2 [of a percentage point].”
He said that these small value adjustments should be kept in perspective, especially when compared to the recent five-year growth cycle.
“Historically, property values move in five- to seven-year cycles and the most recent cycle has proven to be super-sized, particularly in Sydney and Melbourne.
“In the five years following June 2012, Sydney property values increased by 74.9 per cent and Melbourne property values by 59 per cent, with national capital city dwellings increasing cumulatively by 47.3 per cent.”
But despite the levelling of the market, Mr Lahood insisted that it remains resilient.
“Given the number of factors impacting the real estate market today, we are still seeing significant buyer activity and there are greater opportunities for first home buyers and first-time investors.”
He added that the factors include changes to lending criteria and a reduction in foreign investment.
“The major banks have initiated greater lending restrictions reducing the availability of finance, with the Hayne royal commission promoting further lending controls.
“And, as recorded by the Foreign Investment Review Board, overall foreign investment in Australian property has reduced. Chinese investors are responsible for $1 in every $4 foreign dollars invested in Australian residential and commercial property, and during the 2016–2017 financial year, Chinese investment halved to approximately $15 billion from the previous financial year.”
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