Melbourne’s property market is suffering under a glut of stock, with prices continuing to fall – and experts aren’t sure when the decline will stop.
The situation has been evidenced through weak auction clearance rates, which continued at the weekend as the city only managed to record a 55% clearance rate, with only 331 auctions – 10% lower than last year.
Data from SQM Research last week showed Melbourne’s residential listings grew by 6.1% in June, and were up by 27.7% from the same time in 2011. The city now has more than 55,000 unsold homes and apartments.
This comes as new data from the Commonwealth Bank reportedly shows homes in the outer suburbs of Melbourne are fetching prices significantly lower than when purchased in 2008. In some cases these home owners owe more than their assets are worth.
And property experts say this situation will continue.
“The current trend is clear – house prices are still falling in Melbourne,” says SQM Research managing director Louis Christopher.
“This is not a sign of a healthy market, and there is no real recovery occurring. Housing financial approvals are still quite weak, and we don’t see the trend changing.”
APM economist Andrew Wilson says while he believes the market is fragmented, and that some parts of Melbourne are performing better than others, it’s clear the mid-market is “in some serious hibernation right now”.
“There has been a pretty good value offering in the prestige market in Melbourne, and we haven’t recorded price falls there this year.”
“But it’s the middle part of the market that is in some serious hibernation right now. It’s a ‘wait and see’ scenario, and they’re just wanting to hold on until there’s some better news in the economy and there’s more confidence in the market place.”
“Until then, I think things will remain flat.”
Some of the data in Melbourne is alarming – homes are selling for tens of thousands of dollars less than they were purchased for just a few years ago.
But Wilson is encouraged, saying this isn’t a fire sale and that much of the construction has been overstated due to apartments built in the inner city.
“We’ve seen a lot of new apartments in the inner CBD and in inner suburbs, and that’s one aspect that tends to inflate that stock on market figures.”
“But we’re also not seeing a fire sale scenario at this stage, so I don’t think there’s much concern for that aspect of the market,” he says, noting unemployment remains low and people can still pay their mortgages, even if they may be struggling.
Nevertheless, Christopher says vendors are attempting to find a price on the market they just won’t get, and warns sellers they should take their property off the market.
“These listings are just not being absorbed. They’re staying on the market, and that’s part of the reason the market is blowing out.”
“Having your money on the market costs more. I would suggest the best thing they can do is just withdraw their property, if they’re not prepared to meet the market.”
Around the rest of the country, results weren’t much better. Sydney recorded a clearance rate of 56.2%, while Adelaide and Brisbane recorded 31% and 34.1% respectively.