Melbourne auction clearance rates could break through 80%: Greville Pabst

There were a reported 555 residential properties auctioned in Melbourne at the weekend, 75% of which sold.

The weekend news gave voice to speculation that the Melbourne market is oversupplied and that prices are set to decline in the coming months.

However, this broad view is unfounded with all signs to the contrary and trends indicating property prices will increase further as the year draws on.

While stock levels are nominally higher than is typical for the winter period, the higher volume is coupled with very strong and stable clearance rates, indicating that underlying demand is more than sufficient to absorb current stock.

In fact, current trends indicate that clearance rates will increase even further as spring unfolds, with WBP property adviser Phil Manning tipping clearances rates will reach 80%.

Current rates show that almost three in every four properties auctioned are successfully sold - an increase of more than 10% when compared with the overall clearance rate in 2012, and that’s with an increase in stock levels.

The type of stock available at present is also worth noting. There is a high proportion of poor quality non investment-grade stock available, which is driving greater competition for quality assets.

But, while current demand is good for quality properties, it’s also benefiting property in general in Melbourne’s inner suburbs. The ferocity in competition means many homebuyers and investors are becoming indiscriminate of flawed properties.

The current environment in the property market is underpinned by relative affordability, record low interest rates and the stability of the property market as an investment class.

Current conditions are unlikely to change in 2013, which will continue to drive growth in the marketplace for many property types and locations.