No signs yet of recovery

No signs yet of recovery

Auctioneer Scott Patterson braved the chill yesterday and this four-bedroom house in Mowbray street East Hawthorn passed in for $2.55 million. It sold later for $2.57 million. house prices

Last Saturday marked the halfway point for the 2012 property market and considering conditions on the ground it’s become clear that forecasts of an impending recovery have amounted to little more than wishful thinking.

Despite steep interest rate cuts, sharp price falls and a well-performing economy, buyers have proven unwilling to take advantage of the “favourable” buying opportunities presented, judging by auction clearance rates, loan approvals and sale transaction volumes.

While many industry players are blaming the media for putting an undue emphasis on “negative” news, nearly every market indicator shows that, in fact, conditions are continuing to weaken in Melbourne.

The latest figures from analyst Residex show the city’s median house price has fallen 2.7 per cent — or $15,500 — over the five months to May.

RP Data-Rismark has pegged the loss at 5.4 per cent for the same period, with the drop accelerating in recent months.

So far, the sharpest declines have occurred at the top end of the market, although the middle and lower-end price bands have also experienced falls.

One of the biggest issues is the massive — and still swelling — backlog of stock on the market.

SQM Research estimates there were 52,094 properties for sale in May, which is just 600 homes shy of the peak hit in November last year.

It also represents a 19.4 per cent surge on the number of properties listed for sale in May 2011, when conditions were stronger.

Meanwhile, Melbourne’s auction market has weakened over the course of 2012, although there is a dispute over the degree.

The REIV says the clearance rate for the year so far is 61 per cent. But, as Market Wrap has previously revealed, that figure includes hundreds of previously unreported results disclosed only weeks after they occurred, as well as an unknown number of passed-in auctions that were later revised to “sold”.

In contrast, a tally of the REIV’s weekly results show the sales level is 58 per cent so far, one percentage point below the clearance rate last year.

Regardless of the disparity in the overall figure, the improved demand anticipated in the wake of the Reserve Bank cutting the interest rate twice since May has failed to materialise.

In fact, after rising to 61 per cent in early May it has fallen to a near-low of 55 per cent last weekend. And the slide has come despite the number of properties going under the hammer shrinking by more than 10 per cent compared with last year.

Whether the current state of affairs is a negative or a positive will, of course, depend on whether you’re a vendor or buyer and, ultimately, individual circumstances.

As for what’s ahead over the rest of 2012, any prediction should be taken with a (very large) grain of salt, considering how accurate previous forecasts have been.

The weekend auction clearance rate was 59 per cent for the 432 results reported to the REIV. The outcome of another 58 scheduled sales is still unknown.

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