Market Comment - Monday 31st January 2011

The 2011 real estate market has opened. Like all years, it will begin like a huge locomotive. It will slowly gain traction, and then begin to pick up speed before its momentum will carry it through to Easter. The REIV have reported a 54% clearance rate when taking into account all auctions since 20^th December 2010. This weekend’s clearance rate was 51% however out of the 126 auctions, 48 have not been reported.

Whilst there were substantial swings and roundabouts throughout last year, as predicted, (Overall, 2010 will bring us a fresh round of record prices. I think we will see at least 10% - 15% upward movement in the inner city and established suburbs around Melbourne – market comment 14/12/2009) the house price median according to the REIV increased by 11.4% from December 2009 – December 2010 and apartments for the same time moved 9.3%. For the first time ever, the median house price of Melbourne exceeded $600,000.

For an opening weekend there was a good result in Highett on Saturday. A unit expecting high $400’s went on the market at $500k and sold at $506k. Whilst I do not expect this property to set a benchmark of any kind it was a good result for the vendor.

Floods: Do not expect anything but political point scoring to come out of the Australian floods. Usually, after a natural disaster of this scale, the economy dips marginally and then comes back strongly as the government spends the money on rebuilding.

Interest rates: I cannot see any movement this month. All other bets are off. I believe there will be one rise between now and June, and it will depend on how much the banks pass on as to whether there will be more. The more interest rates move, the more pressure there will be on homes in “New Estates” and rises in interest will put pressure on landlords to raise rental rates. This will actually have an effect of raising prices in inner city suburbs not lowering them.

Finally, our overall economy is still booting along nicely thanks to China and it also looks like the US is slowly emerging from the GFC, however, do not be complacent about what is happening in the Middle East. Egypt controls the Suez Canal and a substantial amount of oil is carried by ships through this canal every day. If it were interrupted and ten to fifteen days were added to the shipping time to go around, then this could potentially slow world economic recovery. This may have an effect on interest rates or exchange rates and then by extension, on property prices.

Anyone considering a property purchase this year should be looking for expert advice. Please feel free to give us a call or drop in for a chat

Ian James

Director JPP

Market Comment - Monday 24th January 2011

Welcome back to our weekly market comment series. I hope each and every one had some sort of break over the festive season and are ready to get back to work in 2011.

Property affordability is again in the News. Demographia International has released a report ranking 325 cities around the world on property price median vs. median income. As has become usual, Australia has been on almost the very bottom of the unaffordability lists. Sydney, Melbourne, Adelaide and even regional centres such as Geelong and Ballarat get a mention. The study looked at cities in USA, Canada, UK, New Zealand, Ireland, China and Australia.

China, (Hong Kong) was by far the most unaffordable city, followed by many of the Australian cities then the rest were spread out over the 325 places. If we also look at whose economy has faltered during the GFC, we see that all but China and Australia has dropped prices dramatically over this period. Both Australia and China did not.

I think there is a good point that comes out of this study. It shows that the release of land on the fringes of the city should be made more affordable and easier to build on for the young first home buyers who wish to own their homes. However, the release of this land would not negate the want of most people to live closer to the CBD and as such continue to push prices up in the 0 – 20km radius of Melbourne.

The market this year will most likely be more stable than last year. I believe we will see a far more restrained growth, without the massive climbs and falls. The market in the more established areas of Melbourne should grow in the vicinity of 7% – 10% whilst I can foresee the outer fringe, “new estate” areas potentially showing a correction in the recent upward surges they have shown thanks mainly to the First Home Owner Grants of late

At JPP we look forward to assisting you with your future property needs. Please feel free to give us a call or drop in for a chat to talk about your next property purchase.

Ian James