Cooling market in May or still hot? Who to believe?
May’s 4 weekends saw in excess of 3,496 auctions reported to the Real Estate Institute of Victoria (REIV). More than 2,758 sales were recorded. Approximately 738 properties passed in with 312 of those on a vendor bid. The averaged clearance rate was 78%, down on May last year with 80%.
The figures show a strong Autumn auction market across May. But there have been conflicting media reports in the last few weeks about where the market’s headed.
It’s like a tale of two cities. One Melbourne has high demand and frequently smashed reserves. The other Melbourne, according to some economic researchers like Core Logic, has cooling values and is on the brink of a downturn.
Citibank announced in May that a correction’s looming, in the next two years, of as much as 7%. The higher end of the drop applying to high-rise apartments. The cause of this being the cumulative effect of government measures to curb unfettered borrowing and investor buying.
The economic forecasters analyze data like mortgage defaults, which apparently had a spike in the March quarter. And also borrower finance patterns, which shows young home buyers are cobbling dodgy finance together, including informal parent loans and unsecured credit card debt. This makes for shaky ground in an economic environment where the sands have been known to shift. And shift big.
So who to believe about where values are headed? Agents reported multiple bidding at many May auctions. Properties in desirable locations keep smashing reserves. On May’s last weekend, a Northcote house went $700,000 over reserve, a Yarraville house went $340,000 over and a North Balwyn corner block went $500,000 over. Despite the new under-quoting regulations calling for more accurate valuation. Meanwhile on the urban fringe lot prices are rising at an unprecedented rate. Up 6.3% to $250,000 in the March 2017 quarter with no sign of easing. In this light, media reports about sliding Melbourne property values in Autumn simply look out of place.
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