The property market has delivered another lacklustre performance in the lead-up to Christmas, with one expert saying the huge overhang of properties for sale will cause downward price pressures in the New Year.
And the market is only going to soften in the lead-up to Christmas, with only 660 properties set to go to market next weekend in Melbourne, compared to this week’s 1,000-plus.
The Real Estate Institute of Victoria said there were 1,087 auctions last weekend in Melbourne, but only 61% of those sold, leaving hundreds to join the already flooded backup of listings. Andrew Wilson, economist for Australian Property Monitors, says this is an unusual occurrence at this time of year.
“If you look at these high stock numbers, it’s quite unusual to have such a high number at this time of year when auctions tend to die down. But this is a direct result of the interest rate rise on Melbourne Cup day six weeks ago.”
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Wilson says this rush of listings is due to the panic caused by that latest rate rise, when owners suddenly felt as if they had to sell to capitalise on the large growth recorded over the year. “There is a six week or so lead up before an auction, which corresponds to around now,” Wilson says.
“So people have come to a decision six weeks ago that they need to sell. And now of course, people have held back and waited until now to sell.”
But Wilson says this desperation to sell continues to put downward pressure on prices.
“I went to an auction yesterday in Port Melbourne, and it was for an apartment. I would have expected it to go for $600,000 but the only bid it got was $520,000. People are simply looking for a bargain and they aren’t stupid – they don’t have to buy up unless they’ve already sold another property.”
“Compare that to the people who have to sell, who are forced to sell, and this is causing that downward pressure.”
Wilson says more buyers will notice this downward pressure, and will wait until early next year because they won’t be forced to buy – but this will only cause further downward pressure.
“Logic tells you that there is plenty of unsold stock. We’ve got 1,000 auctions in Melbourne but there are hundreds that don’t sell. People won’t buy unless they have to, and so next year you’ll have these properties on the market… and median prices will start to fall.”
“You’re having these stress-type sales that are happening now, and that is going to cause median prices to fall.”
REIV chief executive Enzo Raimondo also said in a statement that the residential auction market “continues to favour buyers… which is not surprising given this year will see a record number of homes offered at auction”.
The REIV said 61% of the 1,087 properties sold, resulting in a total sales value of $468.93 million. Australian Property Monitors had the clearance rate at 55.8%, with a total sales value of 62% based on 159 reported auctions.
APM also said Sydney recorded a disappointing clearance rate of 48.7%, with 632 listings for the weekend, at a total sales value of $139.8 million.
Brisbane recorded a clearance rate of 6.3% with sales at $1.1 million, while Adelaide recorded a result of 28% with sales at $5.2 million.