In what is arguably one of the most important weekends for spring sales, Melbourne’s weekend auction sales were at record-year lows.
When it comes to the Australia’s housing market, it’s generally the most expensive properties that are hit first. And Melbourne’s top suburbs were no different, with the top 25% end of the market of houses and apartments showing the biggest declines.
‘It’s a bloodbath,’ said Emma Bloom, a buyers’ agent for Morrell and Koren.
‘There’s a big increase in the number of auctions where there is only one bidder, passed in without a bid, or being sold below expectations.’
It seems a credit squeeze, rising interest rates and general home value falls are adding to the clearance rates sliding in Melbourne. This saw clearance rates reach an eight-year low, down 50% in Melbourne and a whopping 70% compared to last year alone.
80% of property auctioned was sold last year, with private sales only making up 20% of the market. But recently this ration has switched.
The situation at hand has been described by RT Edgar director Mark Wridgway, as ‘challenging conditions’ where ‘…Triple-A locations are selling well but it’s harder in the rest of the market’.
More affordable housing is often less susceptible to extreme price swings, but since June cheaper housing markets have also seen declines in prices, suggesting an overall weakness in the property market.
Why property market outlook remains soft
If nothing else, Melbourne’s property market can be called ‘resilient’, according to Kevin Brogan — CoreLogic’s national residential auction market commentator — as sale percentages were near the same as last year’s, despite an increase of 54% to 1,700 in the number of properties on the market.
Similar things were seen in Brisbane, with clearance rates dropping by 34% compared to the same weekend last year.
While Adelaide’s clearance rates actually climbed by 68%, with 133 auctions from the same period last year.
The property market remains weak due to tight lending conditions which have drastically slashed the amount of people looking to invest and at the same time is making it harder for current home owners.
And this has the knock on effect of increasing negative equity — when declines in prices reduce a property’s value to less than the debt remaining on it. This is amid fears of a possible crackdown on negative gearing incentives, which could also be weakening the market.
How homeowners can weather a potential property collapse
Unfortunately for existing homeowners, the weakness in property markets doesn’t seem like a good thing, and for the most part this is true.
But if you fall into this category, ideally you should be actively preparing yourself. Our economic expert, Harry Dent, has two rules for Australian homeowners, you can read more about it for free here.
But for first time property buyers, the low interest rates, double digit discounts and some very lucrative cash incentives are creating new opportunities for borrowers that meet the two income 20% deposit standards.
A market to keep an eye on…
For Markets & Money
PS: Want to know how you could weather the Downturn in Australia’s property market? Economist Harry Dent reveals in his free report: ‘Two Rules for Surviving a Potential Property Collapse’.