High Property Prices are beginning to affect Demand

Melbourne property Market was showing a lot of strength early in the 2010.  It was clear that this was not going to be just another year.  Rates were at all-time low levels and would-be buyers were back in the market in force, swamping open-for-inspections and snapping up all the properties coming up on to the market.

Back then, media reported that home buyers and investors were queuing up just to get in to see the homes for sale, with many properties being seen by dozens of people during the inspections.

Such levels of activity were indicative that record-setting market conditions were on the horizon, followed by sky-high clearance rates and soaring property prices. People were keen to put their homes up for sale after a period of uncertainty during 2009, creating the flood of stock we’ve seen in the past couple of months.

Now Melbourne’s property Market seems to be slowing – the clearance rates have fallen from 87 per cent in late March to 69 per cent last weekend. Across the city, agents and buyers’ advocates have recently begun reporting a sharp fall in attendance at inspections, which are typically staged a couple of times a week during a standard four-to-six-week advertising
campaign.

The numbers are particularly low at properties where vendors haven’t yet adjusted to the change in market conditions – if the price is too high, people are staying away. Fortunately, for buyers at least, that will put vendors under serious pressure to lower their expectations, consider pre-auction offers and, increasingly, accept prices below their reserve to ensure a sale.

Unfortunately, it also means that underquoting will remain as much of a problem as ever as vendors scramble to capture the attention of newly empowered but increasingly fickle buyers.  There has been a drop in activity over this weekend.

According to the Real Estate Institute of Victoria , 23% of the 249 properties up for auction did not sell. In South Yarra, a double-fronted Victorian at 122-126 Walsh Street opened and was passed in on a vendor bid of $4.5 million. The reserve is reportedly $5 million. “I think vendors have got to be mindful that the market has fallen back a little and be less ambitious than they were a couple of months ago,” said buyers’ advocate Michael Ramsay.

The four-bedroom family house at 2 Willurah Street, Forest Hill, attracted one vendor bid at $550,000 and a single genuine bid at $570,000 before passing in, according to buyers’ advocate Bruce Renowden. The property is now up for private sale at $640,000 to $660,000 through Ray White.

In stark contrast, the one-bedroom apartment at 6/18 Kelso Street, Richmond, attracted four bidders and sold under the hammer for $331,000. Biggin & Scott declared it on the market at $330,000.

Four bidders also competed for the double-fronted Victorian at 173 Coppin Street, which opened at $850,000 and rose to $1,026,000 before being passed in. Biggin & Scott sold the four-bedroom house later for $1.05 million. The reserve was $1.07 million.

A below-reserve sale was also negotiated for 13/59 Stawell Street, Richmond. Quoted at $600,000 to $650,000, the two-bedroom apartment passed in on a genuine bid at $685,000. JPP Buyer Advocates said the reserve was $720,000 but the property was picked up for $697,000.

There are 1000 auctions scheduled for 20th and 21st of June 2010, which is the highest stock level ever seen for a winter weekend.

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