Residential property has been struck by the fallout from a shocking week on financial markets, as investors wiped out $US110 billion worth of shares on fears the euro zone crisis would continue to swell.
Clearance rates fell in major capital cities, along with property listings, despite experts saying the market would be able to withhold its current rate through the winter and provide a better return than last year.
“There are plenty of buyers who have one eye on what’s happening in Europe,” SQM Research managing director Louis Christopher told SmartCompany this morning.
“They’re being cautious about taking a large mortgage, so all of this is definitely in play.”
The fall of the Australian dollar hasn’t helped, either – it’s fallen from above parity to $US0.98c in just a few days.
According to the Real Estate Institute of Victoria, Melbourne recorded a clearance rate of 62%, which is up from 60% last week and 56% the same time last year.
But chief executive Enzo Raimondo said in a statement the sharemarket turmoil serves as a reminder “that when considering investment strategies, it is sensible to include property as part of a portfolio as it does not display the volatility of shares”.
However, Sydney recorded a more volatile result. With 57.8% according to Australian Property Monitors, down from 59% both last week and last year. The city recorded 350 listings and 166 sold.
The APM result also differs from REIV’s, with Melbourne recording a 54.7% result, down from 62.3% last week – along with a drop in listings from 693 to 561.
Christopher says the weekend’s results show at least some buyers are affected by what’s happening overseas.
“Australians have been keeping a watchful eye on the market for a while now, and it will continue to be that way.”
“However, we still think the rate cuts will influence the market. It’s just disappointing for the market that this is happening, because if you look at the clearance rates we clearly have people who are concerned about what’s happening.”
Christopher says rate cuts, which economists believe are now a sure thing for the rest of the year, should help the market.
“I’m feeling reasonably confident the rate cuts are going to continue to help buyers. But this is just another factor in the buying process…there’s always something to worry about.”