I’m not going to spend too much time on the auction results today because the market was fairly benign, I felt it was far more important to address the ‘sensational’ headline splashed across The Age yesterday, “House prices set to tumble”.
But, back to the clearance rates.
There were 507 auctions with a clearance rate of a ‘lazy’ 77% with some 392 properties selling and 115 being passed in, one of which one of our clients picked in Kensington for just $565K was an excellent three bedroom, spacious unit with a yield of 5.65% proving there is still good buying if you do your research and get good advice.
Melbourne's house values grew 11.2 per cent in the past financial year, and apartments achieved 2.4 per cent growth. A new report published by the Valuer-General Victoria has listed Melbourne's best performing suburbs for long-term price growth.
The number of auctions rises over the next couple of weeks with approximately 750 auctions due to be held in each of the next two weekends.
Another Disaster Prediction
Three academics with maybe a little too much time on their hands dreamed up yet another ‘property apocalypse’. This time it is based on the simplistic extrapolation of statistical data based on past occurrences and dependent on precise replication into the future within given timelines.
Interestingly as you dig deeper into the story the academics effectively concede their model is experimental with the note that
“…If another 2 or 3 months pass and the prices turn back up and grow more strongly…. our model will have been defeated.”
But this is not the first ‘shock prediction’ academic economists have concluded.
Another self-styled economist, in 2008 at the height of the GFC, Professor Steve Keane, screamed from the hilltops that property was going to crash by 40%! In fact he was so convincing he believed his own publicity, and sold his home only to see property prices soar by over 20% the following year.
The fact is, the property market is controlled by ordinary, everyday people who are active in the market “making things happen”, not theorists sitting on the sidelines “wondering what’s happening”,
Real experts in the property market like WBP Property Group chief, Greville Pabst studies factors that drive the market such as:
- Sustained high population driving demand,
- Sustained low interest rates supporting demand,
- Sustained stock shortages (particularly in the inner/mid band) perpetuating that demand
- And finally, Australian’s affection and understanding of property that they can see, feel and touch.
Look back to 1998 and you will see the consistent year-on-year trend of growth, consolidation, growth. The exception was 2010 – 2013 when Melbourne experienced a longer period of consolidation which effectively allowed the market to catch up to the growth spurt of 2009 and early 2010.
Working with property investors every day I am not seeing the burst of buyer activity that I saw in 2009, but even those heady days didn’t bring the “price tumble” attention seeking economists were predicting, merely an extended period of sideways price movement.
Foot Note: interestingly I read another article this morning announcing that Australian homes were undervalued by one third. This assessment was delivered by Dr Tulip, a senior figure in the Reserve Bank who came to his conclusions by comparing the cost of renting and buying identical properties.
Which expert is correct, the market itself will decide that but I figure it is somewhere in the middle and will be driven by the real drivers of “supply and demand” as it always has been… not simply the theoretical extrapolation of numbers based on past events.