What is going to happen to the property market in 2018?
After more than 20 quarters of consecutive price growth and one in 3 metropolitan suburbs now reaching median house prices in excess of $1,000,000, Melbourne has experienced its first decline in median prices.
With such a prolonged period of sustained growth it was always a certainty that price growth would steady. After all the money has to come from somewhere and with prices rising faster than buyers could produce it, the alteration in the growth phase has come as a welcome change to many property buyers.
Even though price growth has now appeared to slow this does not mean that the market is on the decline. The reported median house price in metropolitan Melbourne fell just 0.2% in the December quarter which is less than $2,000 of the current median price.
According to CoreLogic RP Data head of research Tim Lawless, “The city’s housing market has been far more resilient to negative growth compared with Sydney due to factors such as stronger population growth, lower affordability hurdles and a higher rate of jobs growth, however the growth trend has been clearly moderating since late 2016 and Melbourne’s annual rate of capital gain, at 8.9%, has fallen below double digits for the first time in eleven months.”
A staggering 44 suburbs made the jump into the million dollar territory in 2017 including Mordialloc, Moorabbin and Edithvale however although the pace of capital gains is slowing and in some cases turning negative, according to Mr Lawless, evidence is mounting to suggest that rental yields have bottomed out and are now on the rise. "If the housing market continues to soften across Melbourne, particularly as rents rise at around 4.3% per annum, we could start to see yields firming." This would be a welcome change for property investors since rental returns across Melbourne are currently 3.8% for units and just 2.6% for houses. Rental yields have been steadily decreasing from January 2012 from just over 4% (although they were even higher in 2008 at closer to 5%) across all dwellings combined to their current of 3.2%.
Whilst market conditions fluctuate causing supposed uncertainty for some, what we can be assured of is that that properties are still selling well. Buyer attendances at inspections and auctions remain strong despite the softer clearance rates of 69% from their high point of 80% and higher, the length of time each property sits on the market before a sale takes place are still at just over 30 days meaning that sellers can be confident of a reasonably quick sale.
For anyone considering making a move in 2018, a solid result can still be expected for level-headed vendors with steady market conditions being the prospect in the foreseeable future.
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For all real estate related information or advice, contact the author Simon Wendt, Licensed Estate Agent at Hockingstuart Mentone on 0407 040 706.