Clearance rates have dropped sharply in many Melbourne suburbs in 208’s first quarter as the heated property market went down a gear. Analysis of 2018’s first three months shows the cool change is in, with suburbs as diverse as Chadstone, Balwyn, Berwick, Mont Albert, Sunshine West, Springvale and Altona getting a less than 50% sale at auction rate (Domain Group Data).
The drop has been recorded across both established neighbourhoods and greenfield.
In dozens more suburbs the clearance rate just managed to get over 50% as the hot market enjoyed by sellers for the last few years drops off.
Market peaked in autumn
Some real estate agents claim the market peaked in autumn 2017.
Since then, factors maintaining downward pressure are government crackdowns on overseas buyers and also tightening on investor lending. The sustained surge in Melbourne house values over 2016 and 2017 also had to eventually stretch affordability levels – with buyers in 2018 far more reluctant to raise hands at auction. Bidder numbers are down. Of those still wanting to buy a home put to auction many are preferring to negotiate after the property has passed in instead.
High demand suburbs take a hit
In Prahran just 57.4% of homes sold under the hammer in the first quarter. For the same period last year that figure was far higher – at 73.7%
In highly sought after Camberwell 2017’s first quarter clearance rate was 79.4%, but can only manage 54.7% in 2018’s first quarter. Newport was in high demand last year with a clearance rate of 85.7%, but for the same period this year achieved only 56.9%.
New research by CoreLogic has clarified migration (mostly international) as the main driver of rising home values in recent years. High population growth is the main common factor.
Over the last few years, all 4 states with high immigration levels – ACT, Victoria, NSW and Tasmania are the same states achieving the steepest home value growth. But the states with less than average immigration show the weakest growth.
The lion’s share (75%) of migrants arriving in Australia settle in Sydney with 98,000 a year and Melbourne, 88,000. Accordingly, house values in both cities are Australia’s highest.
But the slow down is no reason for alarm according to ‘Empower Wealth’ buyer agency CEO Ben Kingsley, “The cycle is cooling off a bit, but I wouldn’t say it’s the beginning of a correction.”
Going against the grain of the slowdown are properties at the affordable, entry level end of the scale. These are selling well. First-home buyers taking advantage of stamp duty concessions and other incentives are often competing for these. Units are also being targeted as people seek out affordability, plus convenience for commuting and getting in to the CBD.