July brings clear signs of a recovery.
Over the 4 weekends of July more than 1,338 auctions were reported to the Real Estate Institute of Victoria (REIV). There were approximately 766 sales at auction. 333 properties were passed in, 143 on a vendor bid. The clearance rate averaged 73%, continuing to climb from June’s 67.5% and May’s 62.5%.
Very high clearance rates show buyers are doing their best to take advantage of current conditions, but auction stock is low – 30% less than this time last year. There is a short supply of higher end properties in particular.
Melbourne values had been falling every month since January, but with a slowing rate of decline. But the latest CoreLogic Hedonic Home Value Index shows a warm change has blown in, with a marginal house and unit value increase of 0.2 per cent in June. The heralded recovery is happening and given no unexpected global events impact on the economy, the recovery’s likely to continue.
Conditions are now favourable for a strong Spring market boosted by the Australian stock market running high, interest rates almost at rock bottom, and a loosening of lending requirements coming soon from APRA (Australian Prudential Regulation Authority).
Spring will see a lot more homes on the market. The pent up demand will bring plenty of competition amongst buyers too. Investors in units will be active, looking for good rental returns which have been solid in 2019.
As a typical real estate cycle, the boom lasted 5 years until the end of 2017, followed by a shortish bust of about 2 years so far. Melbourne values rose 73% in the boom and fell back about 10% in the bust.
So overall, residential property had a gain in value of 63% over the full 7 years, therefore averaging a 9% increase per year, which is in line with the classic expected performance of the Melbourne residential property market, over the long term. So despite short term volatility, which can still catch people out, the Melbourne market is staying true to its traditional form. Which is a safe bet at 8 to 9% value growth per annum over the long term!
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