Spring is here, but no real growth until 2020.
Over the first four weekends of September more than 3,193 auctions were reported to the Real Estate Institute of Victoria (REIV). 1,394 sales were recorded. Approximately 1,142 properties were passed in, 607 of those on a vendor bid. September’s clearance rate averaged 59% – down on August’s 60%.
The AFL Grand Final dominated September’s final 5th weekend, but with approximately 50 auctions only, no clearance rate was posted.
September brought that welcome Spring energy, with rising levels of auction stock. But looking forward any new value growth in Melbourne will be patchy at best. For analysts, the shape of the slowdown is showing more form now. Performance will differ by suburb and type of property, but ANZ Bank has predicted a gradual fall in Melbourne home values over the next 2 years. Granted there are no unexpected dramatic events in the global economy, ANZ expects Australian home values to fall 4% nationally across 2018. And a 2% drop in home values nationally across 2019.
CoreLogic has calculated a 3.5% drop in values has already happened in Melbourne since November 2017. ANZ now anticipates close to a 10% ‘peak to trough’ drop for Melbourne home prices, but with positive growth expected to eventually arrive in the second half of 2020.
Further interest rate rises are signalled (by ANZ) for 2019 with the cash interest rate reaching 2% in that year. (Up from 1.5% at present, on $500,000+).
The current Royal Commission into Finance is expected to produce much stricter ‘Loan to Income’ scrutiny on borrowers – the outcome of this might reduce borrowing capacity for many people by 30%! This all adds to downward pressure on home prices.
What are the implications for a home seller in this kind of market?
Well, if you intend to sell, plus also buy another home, you will be moving in the same market and should be insulated from adverse effects, granted you make all the right moves. You may have to modify value expectations for your own home sale in this cooler environment. But then you will aim for good value opportunities as you buy back in, especially if you’re looking to trade up to a more expensive property.
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