THE negative hype around Melbourne’s residential property market is unfounded, according the Australian Property Institute Victoria.
API’s apartment spokesman David Way whilst the rate of sales has slowed, the off-the-plan market has maintained value levels, due to the erratic stock market.
“The global share market fluctuations has had a positive impact on off the plan sales as investors look for safer, speculative bricks and mortar investments, albeit the weight of numbers has declined dramatically.
“The impact of last year’s interest rate rises and the uncertainty in the global economy has hurt sentiment. For stock on the ground, there has been a general lack of confidence, with purchasers’ capacity to pay influenced by lack of wage growth, increased savings or reductions of debt and a lack of profitability in small business which has flowed through to the market,” he said.
He added that the completed apartment market, similar to the broader residential market has also suffered.
Way said that the greatest fluctuations have been experienced in the apartment market above $1.5 million, particularly in areas which are oversupplied because of developer held stock and resales.
API Vic’s executive officer Amy Guy said despite predictions of major falls in values during 2011 the established residential market had in fact stabilised as financial markets continued to perform poorly.
API research found the median house price was $525,000 during the last quarter of 2010 compared to the end of June 2011 at $500,000.
However sales have not held up and some markets have been harder hit than others.
“A significant decline in the rates of sale has also occurred in rates of sale for residential houses across Melbourne with approximately 9% decline in sales from December 2010 to June 2011 and an approximately 20% decrease from June 2010 to June 2011.
“Whilst the third quarter is tracking under the $500,000 median house price for Melbourne, to date only half the sales have been reported. The Reserve Banks cut to interest rates in early November will be a factor to be considered in determining whether there is an impact in the final quarter for 2011,” she added.
Way said whilst residential property continues to be a safe haven compared to other financial investments, he added that broader market will remain stagnant or see a modest gain dependent upon the degree of interest rate cuts provided by the Reserve Bank.
The outlook for the apartment sector in 2012 is likely to be more erratic in terms of capital growth with falls in value expected in oversupplied markets.
Way said the apartment market will be dependent upon large injections of supply in particular locations such as the CBD and South Yarra and how quickly they are taken up.
“Whilst we are aware of a large number of apartments under construction and due for completion over the next 18 months we are not aware as to the real underlying demand. Some economic forecasters report under supply and conversely a growing number indicate we are at equilibrium.
“The key to the apartment sector may well be owner occupiers returning to the market in 2012 if the Reserve Bank tempts them with further rates cuts and general sentiment improves,” he said.
Way also said the decline in immigration has hurt universities and could result in an increase in the apartment vacancy rates in the CBD and fringe, particularly as large stock supplies arrive over 2012 and 2013 in Melbourne.
“Once vacancy levels push past 3% then there is likely to be a retraction in apartment rental growth which will have an impact on investors,” he concluded.
PropertyReview
