It seems to me that now we have the Federal Budget out of the way the Melbourne property market is continuing its climb.
But how long will it last?
While there were not a lot of positives in the budget for investors, it certainly could’ve been much worse.
And that’s the point….
After weeks of rampant speculation about various housing affordability policies, once the budget was over and done with, many investors probably breathed a sigh of relief.
But some commentators are at odds about where Melbourne’s market is headed this year.
Especially since the figures suggest the overall results are taking a breather from their long uphill run
When you take a look at the latest auction results, you’ll see the Melbourne auction market still producing robust results for sellers.
What do these results tell us about the market?
Well, if you ask me, they tell us that there are still plenty of buyers out there keen to buy in Melbourne.
In fact, demand for properties in investment grade suburbs remains intense with multimillion-dollar auction sales happening in Parkville, Canterbury, Edithvale, Camberwell and Carlton North over the weekend.
Too much supply?
But if we consider the latest report from CoreLogic, the Melbourne market is at risk of oversupply.
According to CoreLogic’s research head Tim Lawless, there are about 28,000 properties currently advertised in Melbourne, which is equal to a supply rate of about 4.2 months.
Comparatively, its Melbourne “months of supply” figure was 3.8 months this time last year, 2.8 in 2015, and 4.9 at its previous peak in 2012.
Lawless believes there are signs that demand is starting to cool in Melbourne.
But, in the sense of population growth, demand for housing in Melbourne is very strong, he says.
Yet in terms of actual demonstrated market activity, he’s seen about a 12 per cent reduction in sales in the Melbourne metro area in the past 12 months.
He also believes that rising house prices are blocking more buyers from the market.
Tighter borrowing conditions for investors could also be having an impact.
As far as Lawless is concerned, Melbourne’s market is likely to cool this year.
Who to believe?
So it seems that no one really understands where property prices in Melbourne might go this year!
For mine, the market will moderate – property price growth will slow down.
But this will be very fragmented as there is a shortage of “A Grade” properties
So, what should you as a smart investor believe?
Of course, the answer to that is simple if you ask me!
If you’re into property investing for the long term – and that’s the only way to do it – buy the best property you can afford and watch it slowly increase in value. Don’t sit back and try and time the market – even the experts can’t agree what comes next.
When it comes down to it, Melbourne is our second biggest capital city and is tipped to overtake Sydney in the years ahead.
Those numbers mean that investing wisely there will always make sense.
But you have to buy in those areas that will always be in demand.
And never speculate on the future performance of Melbourne suburbs that may not cut the investment mustard now or in the years to come.