property glut hits victoria

Buyers in the box seat as property glut limits vendors
Tim Lawless
May 28, 2012

According to the RP Data-Rismark Home Value Index, Melbourne dwelling values are down 8.1 per cent since they peaked back in October 2010.

According to the RP Data-Rismark Home Value Index, Melbourne dwelling values are down 8.1 per cent since they peaked back in October 2010. Photo: Josh Robenstone

ACROSS Victoria there are 71,190 properties for sale.

That is 36 per cent more homes than at the same time last year. In late 2011, the number of listings was even higher, but since late November we have seen listing numbers reduce by about 6 per cent across Melbourne and by a smaller 2 per cent across the state.

The large number of property listings isn't confined to Victoria. Every state and territory apart from Western Australia and the Northern Territory are recording more properties for sale than at the same time last year.
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Importantly, though, Melbourne has shown the largest percentage increase in housing stock levels over the past 12 months.

The high stock levels aren't the result of ''dumping'' (where a larger than normal number of homes are added to the market). The number of new listings is actually about 17 per cent lower now, than it was at the same time last year.

The large numbers can almost entirely be attributed to a lower rate of absorption. Properties are being added to the market at a faster rate than they are being sold.

The numbers of houses and units sold have been trending lower across Melbourne since peaking in early 2010. The large number of homes for sale clearly has a flow on affect. For buyers there is more stock to choose from and less competition.

Prospective Victorian home buyers have more leverage when it comes to negotiating on price and plenty of time to make an informed decision.

For sellers, the current market conditions imply that pricing expectations need to be realistic. In most cases a vendor will get a lower sale price on their property now than they would have when the market was racing along in 2009 and 2010.

According to the RP Data-Rismark Home Value Index, Melbourne dwelling values are down 8.1 per cent since they peaked back in October 2010.

These trends are evident across various 'vendor metrics'. For example, the average time it takes to sell a typical Melbourne house has increased from 52 days in March last year to 79 days now.

The rate of vendor discounting, which is simply the average percentage difference between the original listing price of a property and the ultimate sale price, is now down by 8.2 per cent. One year ago it was down 5.7 per cent.

Auction clearance rates, which are another good barometer for understanding the balance between buyers and sellers, have recently shown subtle improvement, remaining above 55 per cent for most of 2012. Although there has been an improvement in clearance rates remaining much lower than the 75 to 80 per cent seen in early 2009.

The high stock levels indicate a market that favours buyers rather than sellers.

Buyers have the luxury of choice and time while sellers are competing against more properties for fewer buyers.

Read more: http://www.theage.com.au/business/property/buyers-in-the-box-seat-as-property-glut-limits-vendors-20120527-1zcxw.html#ixzz1w6Hu76KF