As noted in a recent blog post, auction clearance rates in Melbourne have slid quickly. For some strange reason, the REIV persists with reporting that it is still sitting in 65%+ (67.7% for June). This is closer to 50% when ALL results are included, rather than reported results.
But, onto prices. Whilst trying to put a positive spin on results is understandable from the REIV, given they represent the real estate industry (agents), it’s a little harder to spin actual prices. They report that house prices in the last 4 weeks (to 17/5/22) have dropped by 4.8% and units by 7.1%. IN A MONTH! Now they do throw in the preferred headline that the Property Index (RMX) has dropped by 3.4% for the same period. It’s not entirely clear how this is so modest, given that both the units and houses are so much higher, but bonus points for obscuring the raw figures. **
These figures are really only statistical confirmation of what we are seeing every day currently. There is a noticeable and significant drop in prices over the last few months. As for development land, well, it’s a bit of a landslide. With prices predicted to continue to fall, and construction costs rising at a giddying pace, the only way to still make projects work, is to pay less for the land.
Now, two factors that will start to come into play over coming months are firstly, supply of properties onto the market will diminish. Secondly, the cost of construction will reduce new homes being built. Both of these will affect prices upwardly. Not enough to stop the slide, but certainly a brake on the price drops. So just quietly, we don’t see prices dropping as much as predicted by most economists over the next 12-18 months. Remember the collapse of prices predicted at the beginning of Covid-19?
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