Lowest clearance rates in 5 years?
In May more than 3,790 auctions were reported to the Real Estate Institute of Victoria (REIV). More than 1,787 sales were recorded. Approximately 1,207 properties werepassed in, 627 on a vendor bid. May’s clearance rate averaged 64.5% – down on April’s 67% and radically down on May last year’s 78%.
With the figures in we see clearance rates are continuing to head south, hitting a 5 year low during May, going under 60% at one point, according to Domain Group data. Domain’s survey figures often differ from REIV’s who put May’s lowest clearance rate at 63%. Whichever way you look at it the scenario has changed radically in 2018 with a switch of fortunes. Sectors of the inner city and Bayside markets have stalled, with reports of discounting and uncertainty setting in. While outer suburbs are benefiting from high demand and keen buyers.
It’s a top and tail scenario where entry level homes and glamorous top-end properties are getting value growth but nearly everything else is the meat in the sandwich. Properties under 2M in parts of inner Melbourne favoured by single professionals, in spots like Richmond or Elwood are still in demand and buyer competition is keen. Whereas 2M+ larger family homes in blue-chip suburbs like Kew, Camberwell, Brighton & Sandringham with large outgoings like school fees, have been hit hard.
The slow moving but powerful dynamics that drive property demand in cycles are giving vendors a roller coaster ride again in 2018! Economists remind us that house prices are set by demand and supply of credit. Not by demand and supply of housing.
An interesting survey by ME Bank published in May revealed that 20% of home buyers get caught up in their rush to secure a property and overspend their carefully estimated budget. Often going over by $150,000. This means there are many new homeowners out there facing very difficult repayment conditions. People in these circumstances were highlighted in the recent Royal Commission into Banking.
With recommendations for more stringent and responsible lending by the banks in future, the tightening of credit will produce further downward pressure on home value growth.
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