Monthly Market Update : March 2019
By | 26th Mar 19

Your monthly market update by Frank Valentic

Melbourne’s property market has found a consistent level at the start of this year.  The clearance rate has averaged around 55% mark and this is a slight improvement from last year where the clearance rate was 45 to 50% mark.  There were some stronger results this month with 4 to 5 bidders at some auctions.  We were not seeing this late last year and some properties are now selling $100,000 to $200,000 above reserve.  There seems to be sense of getting on with business from our buyers after the Royal Commission findings and now talk that there might be some RBA interest rate cuts on the way as well.

Home loan growth is evaporating and housing credit is growing at the lowest rates on record as investors are pulling out of property market. The Reserve Bank of Australia stated the total amount loaned for housing increased just 4.4% for the year and it’s the equal lowest growth for more than 34 years of record keeping and investors accounted for just 1% of housing credit growth in the last year.

Many investors have had to switch their loans from interest only to principal and interest. Previously they were not paying off principal but now they have to. Will this have an effect of having more properties on the market as some investors can’t afford to hold these properties anymore?

Investors usually drive the growth and consistent demand in the Melbourne property market. Their numbers have dropped by 47% and total lending was $4.89 billion in December and this was well below the peak of April 2015 of $9.37 million. Owner occupier numbers have continued to be similar to 2015 numbers. It is really investors that have dropped off and this has really impacted the property market’s performance over the last 18 months.

Many of our investors and landlords have been hit with major increases in their land tax bills. This will push quite a few of them into selling and then there will be less rental properties available for tenants. One of our landlords had a 50% increase in his property’s valuation price, yet the Coburg median house price decreased 1% in the last 12 months. 

Many developers are abandoning development projects due to the changing market conditions. There have been a number of development sites which developers are just sitting on now or have sold. We saw a developer make a massive loss of $1,275,000, selling two houses which were side by side on Dandenong Road, Prahran. They decided to sell at a big loss rather than go ahead and take the big risk of doing the project.