Trends in 2011
Looking toward 2011 there are several trends that will influence the local residential property market.
Interest rates and housing affordability
House prices might have stabilised over the past six months but the cost of home ownership has not. As a result of multiple interest rate increases, which have not been matched by higher incomes, housing affordability has been substantially eroded over the past 12 months. Further interest rate increases would have a negative impact in 2011. As a result, in 2011 suburbs at or below the median will increase in popularity.
Auction stock levels
Many home owners looking to sell in 2011 will have watched the performance of the auction market over the last few months and noted the drop in the clearance rate to around 60 per cent. This is likely to lead to several sellers looking to use private sales rather than auctions as the selling method in the same way that high clearance rates in 2009 led to more auctions in 2010. This is then likely to increase competition for the homes at auction.
First home buyers
With the promise of a 20-per-cent cut in stamp duty from 1 July 2011, we are likely to see a small increase in first home buyers in the second half of next year.
There still remains a substantial gap between the Victoria’s population growth and the supply of new dwellings; this gap won’t be closed in 2011, resulting in ongoing pressure in all segments of the housing market.