The dismal Spring selling season has delivered an oversupply of properties that will last well into 2011 and prolong downward pressure on prices, experts warn after another depressing weekly result in the Melbourne and Sydney markets.
The comments come as new figures show new home sales increased slightly during October, but Housing Industry Association senior economist Harley Dale also says the outlook for property is not a positive one.
“I think it’s definitely going to be a flat to moderately weaker market over the next few months. I think we have seen the market move from truly a seller’s market into a buyer’s market,” he says.
Over the weekend in Melbourne, the last of the Spring selling season in the most active auctions market in the country, Australian Property Monitors reports a clearance rate of 56.8% with 1,096 listings, while the Real Estate Institute of Victoria claims 61% from 1,025 listings.
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The result is a typical one for the past three months, when buyers have been put under pressure due to interest rate rises and large increases in prices.
Several experts including Louis Christopher from SQM Research have pointed out that as buyers attempt to capitalise on large gains, while buyers back away due to interest rates, a large amount of stock has remained unused on the market. That stock is expected to last into next year, but will only keep downward pressure on prices.
David Airey, president of the Real Estate Institute of Australia, says the result was similar to those seen throughout the past three months and that overall it was a disappointing season – one that indicates downward pressure on prices will remain during the first quarter of 2011 and worsen as interest rates increase.
“Clearance rates are one factor but average rates will show there is a significant oversupply, and people have simply stopped paying up. Things have stalled and they are very careful about what they will pay.”
“I think now a lot of owners will take stock in the few weeks to Christmas. A lot of stock usually comes off the market then and I think there will be a bit of a re-jigging of property and re-rating of existing properties.”
Airey says that during the first few months of 2011, potential sellers will start thinking about putting their properties back on the market and rethink their asking prices.
“There have been some strong auction results in Melbourne, but very rarely are auctions conducted in late December and early January. Auctions take up to five weeks to prepare and the market has slowed.”
“At the very top end, where there are some multimillion dollar sales, you still have some activity. But the idea that you can get a 2007 asking price today is simply a distant memory. Owners will probably change agents after they reassess, and there will be many factors that influence decisions. That will occur over the Christmas period,” he says.
Meanwhile, Harley says it is inevitable that the market continues to slow. Although the new HIA data shows new home sales increased by 2.4% in October, he says over the previous quarter sales still fell by about 9%.
“That result hasn’t made much of a material difference. If a rise in October becomes four or five rises over the next six months then that is encouraging news, but we haven’t taken too much solace out of the news.”
Dale says the result clearly indicates the property market has stalled – a result he expects to see sustained over the few months of 2011.
“I think people do expect rates to move higher over 2011 and the start of that process should start in the middle of next year. If you did have a period of a few months where rates are flat to moderately low, that may see some people reengage in the market.”
As for auction results, the REIV puts Melbourne at a 61% clearance rate out of 1,025 listings. REIV chief executive Enzo Raimondo says the result indicates higher volumes will stay around for awhile.
“Volumes continue to be very high, a factor that naturally reduces competition between buyers for homes at auction. This trend will continue until the end of the year with more than 2,400 auctions expected over the next two weekends.”
APM puts Sydney at 53.4% out of 770 listings, while Adelaide recorded a 38.9% result from 99 listings. Brisbane recorded a result of 26.3% from 113 listings.