The state of the market: be aware, not alarmed
11-Jun-2005
The ABS recently reported Melbourne house prices fell 1.7 per cent in the March quarter and BIS Shrapnel warns of interest rates rising to 9 per cent next year. Indeed, our own figures showed an even larger fall of 4.9 per cent in the March quarter with the median price now at $352,000. But, how should these figures be interpreted? 2005 is likely to be a year of low but steady price growth, with lower numbers of transactions, as the market returns to normal levels of activity. There has not been a “property bubble” burst, either. To the contrary, the market has clearly experienced a soft landing coming off growth of 10 per cent plus 1999-2003 to growth around 1-3 per cent. Our figures show, the market grew by 1.4 per cent in the 2004 calendar year. We predict something similar this year, and by all indications next year as well. Note the growth in 1999-2005 calendar year median prices below. Quarterly figures should be viewed in a “bigger picture context” and “observed” for the good buys available. Annual figures are a much more tried and tested guide. Dramatic rises and falls can occur in any one quarter, mainly due to seasonal factors. For example prices tend to come back a bit and often fall in the March quarter – largely affected by softer sales over the holiday period. Whereas in spring, the market blooms into action with the highest turnover and best selling period particularly post the AFL Grand Final. The market is now primed for both buyers and sellers: do your homework and notice the market has become more segmented with the traditional areas, namely inner-city, bayside and those with strong lifestyle elements, performing best. Be more circumspect when viewing property in middle and outer suburbs and/or with few distinguishing features. We are not in the business of making interest rate forecasts. However, BIS Shrapnel’s recent “9 per cent interest rate by 2006 claim” is bearish and at odds with most analysts’ views. In fact, interest rate predictions have historically mainly proven incorrect. Many and varied factors can influence our economy and hence interest rates. For example, overseas factors like oil prices and the economies of our main trading partners and the rise and fall of the $A can drastically alter predictions. At best, be circumspect on interest rate predictions.
Metro Melbourne Median House Price (Calendar Year)
