In late August, the properties from the much-trumpeted TV series The Block went up for auction. However, out of the four Richmond properties that were renovated, only one actually sold at auction, with another sold after auction. Is this a (very) public sign that the Melbourne property market is in trouble?
Overall city figures suggest that values continue to slide: RP Data figures show that Melbourne has been the worst-performing capital city over the June quarter, with the median property value sliding by 1.6%, and falling by 2% year-on-year. The majority of the slide is being led by houses: the median house price has fallen by 2.3% since June 2010, while the median for more affordable units has also fallen, although less dramatically at just 0.9%.
The number of properties on the market is also significantly higher than the same time last year. SQM Research reports that, as of July 2011, there had been a 45% increase in stock on market over the year. The company’s managing director, Louis Christopher, says the results foreshadow a weak spring selling season, and could bring about further declines in property values.
“The latest rise in stock levels does not bode well for spring when seasonally, tens of thousands of new listings come on to the market,” warns Christopher. “Unless there is a flash interest rate cut by October, house prices will almost certainly head south from here.”
Rental yields, while improving, also remain the lowest in Australia, with the citywide median for houses at 3.7% and units 4.3%. Vacancy rates are also beginning to tip the scales at 2.8%.
It looks like times are set to get tougher for the Melbourne market – especially for vendors. However, APM senior economist Andrew Wilson argues that some perspective is needed, after all, the value falls do follow a period of significant growth.
“Melbourne is actually showing tremendous resilience in terms of the market, considering the price growth it’s seen – the median value has only dropped by 2% over the year after a rise in values of 30%,” he comments. “I think Melbourne could confound people in terms of resilience – the Victorian economy is strong, confidence is good, and we’re seeing aspirational buyers in the middle to upper section of the market, too.”
Valuers Herron Todd White add that, while sections of the market are suffering, others are holding up. Prestigious eastern suburbs – including Kew, Hawthorn, Balwyn and Blackburn – have seen median value falls of up to 20%, whereas bayside suburbs like Albert Park have seen the exact opposite. Northern and western suburbs are also proving resilient, with Thornbury, Fitzroy, Craigieburn and Epping highlighted as areas where values have held up or increased.
HTW highlights that results vary from property to property, especially in the prestige suburbs. Dwellings that are “very well-located, well-presented and exhibit unique features” are still in demand, whereas those opposite railway lines or on busy roads are taking longer to sell.
So, what’s the verdict for investors? Well, if you’re buying, it’s likely that there will be good opportunities, as long as you’re choosy about what you buy – and can swallow the holding costs in the short term at least.
