November 16, 2018

Melbourne property market stalls as house drops 2 million in value

melbourne property market

Melbourne property market: A large property in a prestigious, leafy Melbourne inner suburb that was last year sold for more than $7 million has dropped in value by more than $2 million, or 28 per cent, highlighting a sharp downturn in the Melbourne property market that until recently continued to hold its value as prices plunged in other state capitals.

The four-bedroom, two-bathroom house on a 1210-square metre block, which is close to some of the state’s most prestigious state and private schools, was passed in on Saturday for $5.6 million, having been sold last November for $7.8 million.

The property was sold last year by RT Edgar and the weekend auction was conducted by Marshall White. Agents said it is a prime development site.

Melbourne’s weekend auction sales slid to record-year lows and Sydney struggled to clear half the properties for sale in another bleak outcome for one of the most important weekends of the spring sales season.

 “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.”
 A credit squeeze, rising rates and falling sentiment are contributing to clearance rates slipping below 50 per cent in Melbourne, the lowest in eight years and down more than 70 per cent for the same weekend last year, and just over half for Sydney.

Agents claim top-end properties in prime Melbourne and Sydney locations selling for north of $7 million to self-funding local and overseas buyers that do not need to borrow remain resilient.

Ms Bloom blames the slowdown for a sharp increase in the number of private – or boardroom – auctions and sales by expressions of interest rather than the more familiar street auctions.

Agents that last year sold 80 per cent by auction and 20 by private sale have reversed the ratio in recent months, she said.

 Mark Wridgway, a director of RT Edgar, said: “These are challenging conditions. Triple-A locations are selling well but it’s harder in the rest of the market.”

Claudio Perruzza, a director of Biggin Scott, added: “Slower sales means there is no buyer urgency. Buyers are often gun shy on auction day. But quality continues to sell.”

Preliminary results show about half of the properties auctioned across the nation’s capitals sold, according to CoreLogic, which monitors sales and prices.

Kevin Brogan, CoreLogic’s national residential auction market commentator, said Melbourne property market is “resilient” because the percentage of sales were around the same as last week despite the number of properties on offer increasing more than 54 per cent to 1700.

melbourne property market
Adelaide sunset

Adelaide had a clearance rate of about 68 per cent, higher than for the same weekend last year, from 133 auctions.

Brisbane slumped to about 34 per cent, compared to about 45 per cent for the same time last year.

The market outlook remains soft because tight lending conditions have dramatically decreased the number of property investors and made it a lot tougher for owner occupiers.

Increasing negative equity, which happens when price falls reduce property value to less than the mortgage, and fears about possible crackdown on negative gearing incentives are also weakening sentiment.

 Lenders continue to squeeze interest-only terms and tighten all borrowers’ affordability and serviceability criteria.

But below 4 per cent rates, double-digit discounts and lucrative cash incentives are being offered to borrowers that meet standards, typically working couples with a 20 per cent deposit.

That is creating opportunities for first-time property buyers and existing borrowers with equity that are seeking cheaper rates or better conditions.

For example, ANZ will this week announce improved rates for borrowers seeking to switch and are expanding the eligibility criteria.

 CBA, the nation’s largest lender, is also increasing discounts for borrowers, with the biggest cuts available for biggest discounts.
Article from Financial Review

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