Residex boss John Edwards has given a relatively upbeat assessment of the national property market – with the notable exception of Melbourne.
The major worry is in Melbourne, where Edwards says there is an overhang of stock.
“I’m worried about Victoria,” he says.
“When I look at the Victorian economy, I can’t see anything that’s actually going to do it any good.”
“It’s on the wrong side of the ledger,” he told Peter Switzer on Sky Business, noting what he called a 70% overhang of stock in Melbourne, the largest stock overhang of any capital in Australia.
The comments come amid a slowdown in auction clearance rates – although sales have improved over the weekend.
“It happened because you had a government that was interested in propping up an economy that was failing because of a failing manufacturing industry by increasing immigration,” Edwards said.
“It thought if it just brought people to the state then the problem would be solved, and it borrowed to do that.”
Edwards says that many of the new jobs were in the spurt that built more housing, but as “always developers fail to recognise when the turning point is, and they’ve failed”.
The industry, he says “still hasn’t recognised the overhang in stock”.
Nationally he says there is a slight oversupply in stock but foresees a national shortage soon, with Perth leading the way.
“There is potentially a slight oversupply of stock nationally. Slight. But we will have a shortage of stock coming into the future,” he says.
“Perth is just going gangbusters. [With] the pickup in activity, it’s got a very clear shortage of stock.”
“The population is increasing, jobs are increasing. It’s the only state in Australia where you’ve had this quite dramatic increase in full-time job activity.”
He says New South Wales and Queensland would benefit from a Reserve Bank interest rate cut but Melbourne has the most desperate need.
“New South Wales has clearly turned the corner. It’s tentative, however. It needs this interest rate reduction to really push it forward. Queensland has turned the corner as well. It looks like it’s about to do quite well. The interest rate cut is needed there.”
“The only state that really badly needs this interest rate cut is the manufacturing state of Victoria.”
Nationally he says the investor market is improving in most cities and will continue to go up.
“You’re not seeing the investors ploughing into Victoria but you are seeing them come back into Queensland, New South Wales and Western Australia.”
“And they’re staying away from Darwin, but they should be moving back shortly.”
He says affordability and investor activity is driving activity in the unit market. He says the increasing growth rate in most capital cities is in the unit market.
National property prices are due to keep rising with the exception of the Gold Coast, he says.
“I’m not worried about falls. All of the markets are turning back up. Gold coast is still a worry. It’s difficult on the Gold Coast.”
“Brisbane is clearly showing a trend now out of its correction phase.”
Meanwhile, the Melbourne property market has held up well over the weekend, with auction clearance rates increasing.
According to the Real Estate Institute of Victoria, the city recorded a clearance rate of 61%, compared to 54% last weekend, with 532 auctions.
Chief executive Enzo Raimondo pointed out there are 58- auctions expected next week, and “auction numbers for the next four weekends are broadly in line with the same period in 2011, confirming that underlying fundamentals have not changed substantially”.
“The increase in the clearance rate today is a positive sign that confidence in the residential market may be starting to improve.”
“If the next interest rate movement is a reduction, as is speculated, and that is actually passed on by the retail banks to borrowers it may further increase activity over winter.”
Clearance rates in Sydney reached 58.9%, while in Adelaide and Brisbane they recorded rates of 47.1% and 15.2% respectively.