Enzo Raimondo, the CEO of the Real Estate Institute of Victoria has just reported on today’s Auction Clearance Rates for Melbourne.
Of the 937 auctions reported today, 84 sold prior to the auction, 475 sold at auction and two sold after, making a clearance rate of 60 percent. There is 135 auctions with no result so far, and as we have seen in previous weeks, we expect the clearance rate to be adjusted down as more data comes to hand. This week last year the clearance rate was healthy 82 percent.
But the comments from Mr Raimondo are the most interesting :
The clearance rate has remained stable this weekend, confirming that the drop in demand from the latest interest rate rise was not temporary. This will now impact stock levels in 2011.
So it looks like weak Auction Clearance rates is something Melbourne will have to get use too as we move into 2011 with the prospect of further interest rate rises to cool our booming commodity market. Inventories of unsold homes continue to grow.
In recent months as awareness grows that Australia is in the grips of the biggest asset bubble in Australia’s history and one of the biggest in the world, we have seen investors flock to the exits hoping to lock in capital gains before they evaporate in front of them. Enzo Raimondo writes :
Its interesting to note that 2010 will see the most auctions ever held in one year in Melbourne, surpassing the previous high in 1999.
According to the REVI, there will be 1280 auctions next week. As Enzo writes :
This [today] is the third weekend in a row with over 1000 auctions planned and the biggest of the year – till next weekend.
The “shortage” of homes appears a distant memory.
ยป Weekly Auction & Sales Results, Market Overview – The REIV, Saturday 4th December 2010
Melbourne is on the way down, its just a matter of how far and for how long now?
Same story in Sydney :
‘Full house of sales set to take year out on a bang’
http://smh.domain.com.au/real-estate-news/full-house-of-sales-set-to-take-year-out-on-a-bang-20101203-18jue.html
A RECORD 2150 vendors have scheduled December auctions, which could boost Sydney’s annual auction sales tally to $15.7 billion, well above the $9.9 billion in sales last year and the $6.9 billion of 2008.
That’s a lot of turnover.
Very curious to know how we adjust for the ‘withdrawn from auction’ number in last weeks results for Melbourne and Sydney. As we now know , we are only getting a part of the picture in Melbourne 60% clearance rate. ??
Auctions work well for the vendor when there is a supply shortage, i.e. significant competition for the property. We are now seeing thet the “Chronic Supply Shortage” is in fact a myth, and the added fact that ALL properties do not sell successfully at auction indicates the buyers out there are at long last starting to wake up, maybe combines with more responsible lending practices (some hope!). Seems the “feeding frenzy” is fading folks, and maybe, just maybe, Aussies are realising that your home’s only worth what someone else is both willing, and able, to pay for it (usually courtesy of a massive bank loan – and they seem to be drying up a little!).
Bad times ahead for the over-indebted, and probably equally bad times for the rest of us (Govt. (taxpayer) backed RMBS anyone??)
hmm but to step back a bit and take things into perspective, there is a shortage of ‘affordable’ property in australia. By ‘affordable’ I mean a basic home in an average area at a price that an average worker can afford. Sydney and Melbourne prices are away in fairy inflated bubble-land – average people don’t need a 1million dollar 2 bedroom unit with european appliances, hence there is no demand for this type of property.
No the government will prop it back up. But I think this time will be different as there is way to much debt. Dont think them propping it up is going do any good now. The mining boom well I reckon that will be done in a few months time as China has to raise their interest rates to slow things down. Its all coming to a head.
@ LBS – you are correct. China is going to slow in coming years which will directly affect us. I don’t see how the government can allow itself to meddle with free market forces. Their task is to prevent bubbles, not keep them inflated.
Unfortunately I believe the government will prop up the market if there was a real correction. The Reserve Bank will probably put interest rates down also, the pressure to do so is enormous coming from numerous powerful interest groups who stand to lose in the short term if there was an appropriate correction(fall) in prices or as in the case of retailers who believe higher interest rates lead to less sales. The fantasy to get rich quick through real estate speculation is deeply ingrained in the minds of many simple Australians. No government would dare dampen this greed directly, they would drawn and quartered if they did! However, hopefully interest rates aboard will go up ,so they will have to go up here too. I wish the banks would stop their reckless lending, but this would only happening via government interventation to curb lending, but the government seems like they will be doing the opposite by creating a fifth bank.
I agree, I think Wayne Swan will bailout / prop up of the housing as early as this Thursday . . .
Keep your eyes peeled.
@ Peter I agree with you but I think this time though people arent going to be able to borrow due to the fact they have to much debt. Granted I could be wrong and people keep digging deeper but I just dont see how people can keep adding to the record high debt. The thing that will kill the market regardless of what the government does is unemployment going up and the mining boom slowing down which as i said before it is on the way. I think this time the govt can do all they want but the inevitable is going to happen. I think K Crudd only stalled the Australian GFC with all the stimulus and now its upon us. Lets face it though Australia needs a market correction badly.
@ LBS, You have hit the nail on the head when you talk about employment as this is the key factor in how the price of property will play out over the next 2 to 3 years. If the government gets lucky and employment holds up and we only get a small rise of say 1% then property should only stay flat with maybe a small fall in prices, but if as I have a feeling the unemployment fig’s starts to head north faster than most people expect the effect this will have on house prices will be massive and we will end up will a big correction of say up to 20%. The fig’s for retail spending are not looking good at this point!
hmm I dont think any stimulus is needed. as long as the government doesnt touch NG or rent assisstance its business as usual for property hoarders.
Pete I agree with LBS. Irrespective of what the govt does to stimulate the market the amount of DEPT people have chosen to accumulate has hit it’s maximum therefore throwing $10,000 at a home buyer is not going to do much when a house that cost $500K in the outskirts of Sydney in 2008 (pre-govt stimulus) is now $700K.
We need a severe correction!
We are in the mist of Australias biggest ever property bubble and the only way forward is for prices to go down. We only hope the decline is steady and doesn’t plunge. Even though we scrutinize what’s written in these articles a big drop would really hurt everybody.
So
Wow go to this website below and read the article titled. This is the scary part of China. I think their crash is going to be much worse than the Japan in the 80s – 90s and the current US GFC. Look at how much excess materials and buildings they have. Its all about supply and demand and they have too much supply. Its a long article but really good.
China Bubble: More Bears Come out of the Wood Work
Raw materials: Corriente says China has consumed just 65pc of the cement it has produced in the past five years, after exports. The country is currently outputting more steel than the next seven largest producers combined
Where are the property CHEER LEADERS when you need them?? “shortage of property” “shortage of property” “shortage of property” woo hoo!
I think an interesting statistic would be how many properties are at auction (and sale) that have never been tenanted! Unfortunately no one has that information but the property GURUS will tell you that there is definitely a shortage! This sounds familiar, wait, wait, …. same story in US, UK, IRELAND, SPAIN …… and now Australia, in actual fact there isn’t a shortage at all as we are now finding out.
Why can’t Australia’s utility companies come clean and tell us how many properties are connected but not using power?
As for Australian banks continuing to lend, well they can’t. There is a thing called fractional reserve banking and our banks no longer have the factions (enough deposits) unless the RBA increases the money supply (which they aren’t doing) to lend and hence they (the banks) rely on external (overseas) structured product market (mortgage backed securities) to lend and that market has all but dried up OR is increasing risk rates (% premium) which results in higher interest rates from lenders.
The Perfect Storm.
If you want to talk stock piling property, China has enough vacant properties to house over half of America! http://www.businessinsider.com/there-are-now-enough-vacant-properties-in-china-to-house-over-half-of-america-2010-9
I nearly forgot, at $10 B / year for property stimulus I don’t think that’s going to fly in terms of Gov stimulus.
If the economy falters, Gov revenue goes into reverse (think Ireland) due to increased liabilities from doll, rent assistance etc etc loss of revenue (income tax), oohhh and our favorite stamp duty!
Go on Wayne – stimulate again!
Three times now I’ve sold into a gov’t manufactured boom and moved into a caravan for a while. Good profit each time. As Steve Keen says “First Home VENDORS Boost”.
This time there is a graver risk to taxpayers, previously it just passed costs to the mortgagee as a lot less money to spend on daily living. Right now it is easy to buy a cheap house, do a reno, wait and sell into the next FHVB.
Selling prices I see are off 20% since 2009. Asking prices are off a fair bit too unless the vendor is ‘fishing with an unbaited hook’. Banks and gov’t sweating a fair bit now and looking for the taxpayer to shoulder the hazard.
Do yourselves a favour folks – vote out a sitting member every election, don’t care which party!