Melbourne prices to remain in the red in 2011: WBP

Melbourne house prices will not recover in 2011 despite a recent improvement in buyer confidence, according to WBP Property Group.

According to the company’s CEO Greville Pabst, an increasing number of passed-in properties have sold in recent weeks after “tough post-auction negotiations”.

Statistics compiled by RP Data reveal that auction clearance rates in Melbourne improved to 55.1% for the week ending July 3, compared with 52.6% for the previous week.

RP Data recorded Melbourne auction clearance rates at 51.3% in mid-July.

Clearance rates are still well down on the year to date, which according the Real Estate Institute of Victoria, stands at 60%.

While taking note of the recent improved conditions, Pabst remains bearish on Melbourne house prices for the remainder of the year.

“There appears to be some early evidence that property values are currently in the lower trough.

“However, while I don’t expect values to fall considerably further, it is unlikely that Melbourne will see any significant positive change in values in 2011,” Pabst says.

According to Property Observer’s Property Clock https://www.propertyobserver.com.au/ebook-where-is-your-market-on-the-property-clock the Melbourne market has some way to go before bottoming out.

Melbourne houses currently sit at 2.25 on the clock and units at 1.50, with 6 o’clock indicating the bottom of the market.

SQM Research managing director Louis Christopher is forecasting a 5% decline in Melbourne house and unit prices this year.

Hotspotting.com.au director Terry Ryder forecasts a minor decline due to a strong economy and continued population growth but has particular concerns for Melbourne inner-city apartments due to a large number of construction projects in the CBD, Docklands and Southbank markets.

For the year to May 2011, Melbourne house and unit median prices have fallen 3.6%, according to RP Data, compared with a national capital city decline of 2.7%.

Melbourne rental yields currently sit at 3.6% for houses and 4.2% for units. The national median yield for capital cities is 4.2% for houses and 5% for units.

Areas which have benefited from a spike in buyer demand include Melbourne’s inner-east, where a week ago clearance rates for units reached 90%.

However, Pabst says buyers in the east remain selective about which suburbs they favour as well as streets and property types.

“Buyers looking in the inner suburbs are in pursuit of lifestyle. They want to be close to the CBD and employment with good access to cafes, restaurants, shopping and recreational facilities; and they’re willing to pay for it,” he says

In recent weeks, the bayside suburb of St Kilda has seen mixed results as buyers vie for only a select few of the many properties on offer in the area.

Despite the overall outlook showing limited potential, Pabst says there are good opportunities for shrewd buyers to secure quality assets at good value.