Not sustainable’ Melbourne’s frantic auction market pace predicted to slow in spring
The median price for homes sold at auction in Melbourne soared to a record $1.15 million in March, as buyers clamoured to snap up the few properties available.
The eye-watering result smashed the previous price record set just a month before by $35,000, Domain figures show.
Unit prices also jumped to record levels of $724,000 in March – adding $24,000 to the auction median in one month.
The massive jump in prices comes as Melbourne’s auction clearance rate lifted to 74.8 per cent across March, the strongest month since the previous property market peak in 2017, data from Domain’s March auction report card revealed.
Price rises have been fuelled by ultra-low interest rates, and the expectation rates will stay low for years, combined with government grants, a low supply of homes for sale and a growing fear of missing out.
Domain senior research analyst Nicola Powell said the Melbourne property market was expected to remain competitive throughout late autumn and even winter.
“Buyer appetite remains, even when tested on higher volumes of scheduled auctions,” Dr Powell wrote in her report.
But while the post-COVID-19 auction market has seen a frenzy of buyer demand, auctioneers believe the frantic pace cannot be sustained for the rest of 2021.
Many believe the market may slow to a more even speed when more properties are listed for sale by spring.
“We’re running a marathon at a 100-metre pace, and that is unsustainable,” Brad Teal Woodards auctioneer Brad Teal said. “There’s a time in a marathon where you have to stop and have a drink.”
Mr Teal said he had already noticed a drop in the number of prospective buyers inspecting houses and units in Melbourne’s north-west.
Over the past six weeks, they had dropped from around 25 a week to just five.
Marshall White Stonnington director and auctioneer John Bongiorno believed the market was still very positive and that it would continue for some months to come. However, the pace and competition from buyers could slow down.
“It can’t continue at this frantic pace, and in the second half of the year, it may just start to slow down,” Mr Bongiorno said. “If there’s no artificial interference like interest rates being put up or any other outside factors, it will remain pretty positive for the rest of the year.”
Right now, the number of buyers at auctions in the inner east of Melbourne was similar to that of the late 1980s, he said, when the property market boomed as those with enough cash looked to invest in bricks and mortar rather than a stock market that had crashed.
It is part of the reason investors and developers are returning to the property market in 2021, adding to the competition at auction for houses with land.
Fletchers director and auctioneer Tim Heavyside said demand from buyers was mainly for houses, with apartments in the eastern suburbs struggling to sell.
“We’re seeing a dramatic increase on price right across the board for houses and units and townhouses, but we’re seeing the opposite for apartments,” Mr Heavyside said.
“Apartments in suburbs like Hawthorn, Camberwell and Balwyn are not going up; if anything, they’re coming down in price,” he said.
Kay & Burton South Yarra associate and auctioneer Michael Armstrong said the price rises for units sold at auction were due to the top end of the market.
“Higher value stock has come onto the market in the most lightly supplied area for a long time, and it’s dragging the numbers up,” Mr Armstrong said.
Like many other auctioneers, Mr Armstrong was preparing for a very busy autumn as sellers returned to the property market to cash in.
“When you get a market like this, once-in-a-generation homes come onto the market – some of the best homes in the best spots – with families who have owned them for 20 or 30 years; they’re picking now to sell,” he said.
Spring, however, would pose a challenge, as more homes were listed for sale.
“Apart from interest rate rises, the other thing that could impact the market is a dramatic increase in supply,” he said. “We’re unlikely to see that until spring, and it could flatten out the difference between supply and demand in homes.”
Ref: MELISSA HEAGNEY | SENIOR JOURNALIST (on 06 Apr 2021). Renters Not sustainable’ Melbourne’s frantic auction market pace predicted to slow in spring. Retrieved from https://www.domain.com.au/news/not-sustainable-melbournes-frantic-auction-market-pace-predicted-to-slow-in-spring-1042167/.
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