This was published 12 years ago
Mixed signals in property market
By Nicole Lindsay
PROPERTY pundits are split on whether an interest rate cut this week could provide a late season boost to the softest property market in years.
Based on initial reporting for this weekend's 656 auctions by the Real Estate Institute of Victoria, the clearance rate reached 55 per cent, a level it has hovered around all spring.
Good fortune: 20 Arnold Street, Princes Hill, sold at auction over the reserve price.Credit: Craig Sillitoe
Some areas did better than others. The north-east region recorded a clearance rate of 65 per cent and the inner south, slightly higher, at 67 per cent. The inner-east has had a tough season and yesterday only 35 per cent of houses sold at auction.
REIV spokesman Robert Larocca said the market ''performed pretty much as it has for the last six weeks - it was nothing if not consistent and this year it's been consistently soft''.
Data shows that sales by auctions are down by 30 per cent this year and private sales by 15 to 20 per cent. It's the softest market since 2004, Mr Larocca said.
''The market is saying to vendors that you have to lower your expectations.''
Nelson Alexander director Arch Staver said he went through a full range of auction experiences over the weekend.
''I had an auction with no bid, another with one bid and some with multiple bids,'' Mr Staver said.
Three bidders pushed a factory conversion at 157 Leicester Street to $2.36 million, well over its reserve of $2.25 million. It was the second highest result over the weekend.
He did not think an interest rate cut would make much difference.
''An interest rate cut is not necessarily great economic news. In reality, this market has only steadily grown on rising interest rates.''
MRPA advocate Michael Ramsay said he thinks the market will rally on an interest rate cut.
''The clearance rate should rise to 55 to 60 per cent. It will rally because there are no other houses to buy in the next few weeks.''
Mr Ramsay acted for a bidder at the weekend's highest-selling house at 31 Adelaide Street, Armadale, who was planning to tear down the double-fronted Victorian property.
But three bidders pushed the price to $2.42 million, well past the $1.8-$2 million price range his buyer was prepared to pay.
Woodards chief John Piccolo had mixed results over the weekend. The Toorak house built by the parents of celebrity medico Geoffrey Edelsten in 1961 was passed in on a vendor bid of $1.8 million.
Mr Piccolo said ''we had two parties interested, but I passed it in on a vendor's bid of $1.8 million and the reserve was $2.15 million.''
Negotiations to purchase the renovated house at 42b Lansell Road are ''in train'', he said.
Woodards had a better result in Princes Hill, where 20 Arnold Street, an unrenovated double-storey Victorian terrace, fetched $1.556 million.
''That was a super result. We had a reserve of $1.2 million and were quoting $1.2 to $1.3 million and we thought in that range we were right on the money.''
''It sold at Toorak prices - $5635 a square metre. It was unliveable. It had been in the same family since 1952 and was in a deconstructed state.''
The property, which was bought by an architect, was large enough to be subdivided.
In Fairfield, another unrenovated and long-held property also sold over its reserve while a renovated neighbour up the street was passed in by Jellis Craig.
Hocking Stuart agent Sam Rigopoulos sold the double-fronted Edwardian weatherboard at 146 Arthur Street for $780,000 - $30,000 above its reserve - after bidding by three parties.
''I am rapt,'' he said. ''Thirty thousand above the reserve in this market is a great result.''
There may be a few more auctions like that next weekend if the Reserve Bank lowers its cash rates tomorrow and the banks deign to pass it on to home buyers. But there are only two weekends left in which to reap the rewards from any increase in confidence.
It may take some better news from Europe's lurching economies to really settle buyers' nerves.