Top end of the property market leading the way to recovery
Following dramatic drops in property prices in Sydney and Melbourne’s top end of the market, they are now leading the way to recovery, with the regional areas of Ballarat, Geelong and Bendigo also performing strongly.
THIS upturn has been demonstrated recently when preliminary auction clearance rates, as published by CoreLogic, leapt from the doldrums.
While both capital cities took a nosedive last year and have been hovering around the 50 per cent clearance rates for the past few months, there was a recent rise in Sydney to 66.1 per cent and Melbourne to 64 per cent.
RiskWise Property Research CEO Doron Peleg said this showed a clear trend of improvement.
“Clearance rates exceeded the 60 per cent mark and this is strongly aligned with the expected stabilisation in the property market,” he said.
“Labor’s loss at the Federal election eliminated the number one risk to the property market and this, combined with the high likelihood of interest rate cuts by the RBA this year, the introduction of the First Home Loan Deposit Scheme and APRA’s proposal to remove the 7 per cent ‘stress test’ replacing it with a 2.5 per cent buffer, will support the bottoming of the Sydney and Melbourne markets by the end of the year and then a gradual recovery.”
Mr Peleg said the top end subregions of Melbourne led the market with the inner-east delivering 72.5 per cent preliminary clearance rate and the inner-south 68.4 per cent.
“Both these areas experienced material price reductions in the recent downturn with houses in Melbourne’s inner-east dropping by 17 per cent in the past 12 months,” Mr Peleg said.
“While the lower end of the market showed more resilience in the recent downturn, the top end went down significantly, and we are seeing a major change in the trend.”
Greville Pabst Property Advisory and Chairman of WBP Group, Greville Pabst, said that the inner-east and south areas of Melbourne had been the hardest hit over the past 18 months.
“Our valuers have reported price weakening in the range of 15-20 per cent, particularly for properties that are in the $2 million-plus price range and other sub-sectors of the market such as new apartments that were previously sold off-the-plan,” Mr Pabst said.
“Whilst the greatest falls have been experienced in inner-Melbourne, this is where the recovery will begin and prices within this inner circle are expected to outperform the general market over the next three to five years.”
“Regionally, Geelong, Ballarat and Bendigo will continue to perform strongly supported by Government grants, first home buyer and stamp duty exemption schemes.
“Infrastructure spending, job creation and affordable housing is expected to underpin growth in regional Victoria for the next five years.”