Oversupply of homes leads to softening of market

June 6, 2010 admin Australian Economy, Australian Housing 14

As expected, this weekend’s surge of listings as investors and owners cash in and head for the exits has seen auction clearance rates take a dive.

The auction clearance rate in Melbourne had been running in the vicinity of 85 percent, but according to revised numbers from the REIV, it hit at low of 72 percent last weekend. Of the reported 808 auctions this weekend, a 70 percent auction clearance rate was obtained. This result is reported to be the worst for two years.

In Glen Waverley the auction clearance rate over the last three weeks has averaged 42 percent. Brighton, Albert Park and Port Melbourne failed to sell more than half the homes up for auction over the past three weeks.

The Age reports Buyers advocate Mal James saying the oversupply has caused a price correction of up to 10 per cent but many sellers are yet to lower their expectations. ”The market has definitely eased in the last three weeks – you can feel it, There is so much stock out there at the moment and the market is not absorbing it up like it did in April when there were frenzied auctions.”

Mark Armstrong of Property Planning Australia says “There’s no doubt the market is not as strong as it was, It’s a fantastic thing for buyers. They can overlook poor-quality or overvalued property because there are so many more options out there.”

The real test will be the weekend after the Queen’s Birthday where 1,000 properties are due to go under the hammer in Melbourne.

» Property tide turning in buyers’ favour at last – The Sydney Morning Herald, 5th June 2010.




14 Comments

  2. No it isn’t that bad yet. But you need to look at the trend which indicates it could get that bad.

  3. lol “its still not that bad yet…”

    “its only a 10% fall….its only a 20% fall…its only a 30% fall”…um its only 40% fall..it’s not that bad…”could be worse..

  6. no, sadly it isn’t.

    we still have record migration, low unemployment (thanx china), low interest rates and the sacred cow … negative gearing.

    at least one of these pillars that supports the over-priced australian housing market would have to be removed and at the moment that looks unlikely.

  8. Paul, the shortage was always just a mirage like was the case in most other countries whom bubbles burst.

    When houses are going up – everyone wants a piece of the action and they buy holiday homes and investment properties. When they can’t get the rent they deserve, they leave them empty – yields were low, so it was really capital gains investors were seeking and you don’t need to rent your place out for that. Developers have no urgency to sell – if they leave it on the market long enough the greater fool will come along and snap it up.

    Suddenly one day asset price growth plateaus. Suddenly investors & property developers consider holding costs of their empty assets no longer appreciating in value; cash strapped families sell the holiday home. This comes at the same time renters are forced out of the market as rents go up faster than their capacity to pay, and they just can’t go to the bank and get a bigger loan, no, rents actually come from people’s pay packets.

  9. I have been looking for a rental property at the moment because I don’t want to own property when this bubble comes crashing down.

    The prices are ridiculous. How can the average person afford these prices?

    Some of the suburbs I looked at had HUNDREDS of rental properties looking for tennants.

    Shortage??? What shortage!!!

    When are the market fundementals of supply and demand going to take effect and see housing and rental prices fall?

  10. When the Government removes Negative Gearing on existing properties (which will never happen). Negative Gearing and First Home Buyers Grants should only apply to new homes to help increase the supply.

    Negative Gearing is the little kid with his finger in the crack of the dam wall holding it up.

  11. Reckon we need to re-think ‘supply and demand’ as a theory for asset markets?

    I hope so called experts are doing some soul searching. One can only hope.

  12. It’s coming!!!! and nothing you can do can stop it! Not even you AverageBloke!!! I was expecting the crashed to happen next year but it could happen this year! Even the spruikers have gone bearish!!!!!! They now say that prices is going to flatten…….what!!!!!!!!! They said it was going to grow all this year so that they can support the claim that house prices will double every 7-10 years!!!! Even if they do grow this year…..guess what, MORE INTEREST RISES! I wonder what that will do?????? 🙂

    Only people with no brains will buy now!!!!!!! Even if i win lotto, i will not buy an overpriced house here in Oz!

    So tell me, who is left to keep this PONZI scheme going????????

  13. The current price of housing in Australia is criminal! Imagine if food or water prices were hiked up this much because the government sat back and allowed them to be stockpiled and used as speculative commodities while people went hungry.

    The government brings in a tax for wealthy mining companies and suddenly there are protests in the streets. I see no protests about the housing rip off. Why?

  14. Even if prices ‘flatten’ I still can’t afford them. In fact I can’t afford the prices of a few yrs ago.

    The government supports the housing bubble in every way that it can without people noticing.

    Ask yourself why did the Rudd government relax foreign investment laws and then re-inforce them again when someone in the media blew the whistle?

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