The Australian residential property market is continuing its streak of good results, with the Melbourne market recording a clearance rate above 80% for an 11th consecutive week.
But the Real Estate Industry of Victoria has said despite conditions similar to the 2007 boom, volumes are low, which is driving more competition and ultimately seeing price increases
“Results from auctions this weekend suggest that the Melbourne auction market is experiencing conditions similar to the boom year of 2007,” REIV chief executive Enzo Raimondo said in a statement.
“The key difference, however, is that the number of homes on the market at the moment is less than this time two years ago. The low stock levels are driving competition at auctions, as prospective buyers compete for scarce homes, sometimes leading to higher than expected prices.”
But Matthew Bell, economist for Australian Property Monitors, says that the lower number of auctions on the market indicates housing demand will continue for some time, giving scope for the property market to recover.
“I agree that the high clearance rates in Melbourne reflect both a strong increase in demand from purchasers as well as reduced supply compared to one and two years ago. With unemployment rising a lot slower and economic conditions generally more robust than many expected, if potential sellers see house prices continuing to rise in the future, there’s less incentive to get them on the market now.”
“With the general view that investors will be looking to enter the market in the second half of 2009 and into the start of 2010, there seems to be a steady pipeline of demand going forward for auctioned properties.”
Melbourne recorded an 86% clearance rate on the weekend out of 383 auctions on the market, compared to 445 auctions during this weekend a year ago. Total sales at auction reached $204.98 million.
Sydney, the nation’s largest property market, recorded a 72% clearance rate, with 135 properties sold totalling $93.63 million.
Adelaide recorded a clearance rate of 59%, with 13 properties sold reaching a total of $6.22 million, while Brisbane recorded a 45% clearance rate with 14 properties sold reaching a total of $7.5 million.
Meanwhile, new data from the Housing Industry Association and RP Data shows that the weighted median price of undeveloped land increased by 7.4% in the March 2009 quarter to $172,490, after four consecutive quarterly declines.
The data found Sydney is the most expensive market with a median price of $259,000, while in regional NSW median land prices grew by 6.1% in the March quarter to $140,000. The country’s most affordable market was regional Tasmania, with a median price of $79,750.
HIA chief economist Harley Dale says the increase is a combination of many positive factors in the economy, and shows the property market is continuing to hold up well.
“I think it’s pretty clearly due to the current interest rate levels, which are very low, and the boost the home market is receiving from the first home owner’s stimulus. If you put those two things together, that shows an improvement in land values.”
But Dale says he isn’t concerned increases will lead to another boom that will see prices rise to unsustainable levels.
“I certainly wouldn’t call these levels inflated. We saw land values fall in each of the four quarters of 2008 and on an annual pace are only up 4% or 5% in the March 2009 quarter. If you put this into a historical context, land price increases in the first half the decade were growing in excess of 10%, and we’re not even in the ballpark of that.
“Overall this is good news, insofar that it’s another piece of evidence that the market is recovering. It’s good for demand and jobs. But we need to be careful of previous mistakes, in that when we had a housing upsize cycle underway we had a lot of structural supply problems at the same time, meaning prices went out of control. We need to avoid that this time.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
