House of cards

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    Melbourne homeowners dropping prices to sell in ‘house of cards’ market



    Property analysts and real estate agents have warned Melbourne homeowners face tough times ahead as the property market shifts in favour of buyers.
    Falling clearance rates, reducing prices, and a retracting buyer pool have many sellers worried.

    Across Melbourne, the rate at which sellers were discounting houses and units has trended up in the six months from the end of 2017 to 5.3 per cent for houses and 6 per cent for houses, Domain Group chief data scientist Nicola Powell said.
    Philip Adam said the he believed tighter lending practices were making it harder for buyers to meet sellers’ expectations. Photo: Greg Briggs
    The discount rate isn’t the lowest it has been in recent years, though. The average was brought down by the traditionally strong inner-city. More affordable areas on city fringe continue to sell with little effort.
    “All of the inner areas … have had the highest levels of discount,” Dr Powell said. “Vendors in those areas are accepting offers lower than asking price to keep line with market dynamics.”
    Philip Adam put one of his properties, a large four-bedroom unit in Elwood, up for auction last Saturday with what he thought was a reasonable price guide of $1.95 million to $2,145,000.
    Auction clearance rates have fallen in both Sydney and Melbourne in the past few weeks. Photo: Peter Rae SMH
    The property had plenty of interest online, but inspection numbers were low and come auction day, the auctioneer struggled to get bids.
    “There were people there. There was a dozen people but it was hard to get people to start the auction and get going. It was passed in on a vendor’s bid,” Mr Adam said.
    He launched the auction campaign for 4/58 Marine Parade several weeks ago, just as the clearance rates began to fall into the high 50 per cent territory. Even after adjusting his expectations in response to the shifting market, Mr Adam still struggled to get a bite.
    Mr Adam’s unit, number 4, 58 Marine Parade, Elwood, is right on the bay. Mr Adam expected it would be popular with buyers. Photo: RT Edgar Bayside
    “The spending power has gone out of the market. I think it’s going to be quite major,” he said. “It’s like a house of cards. I think Melbourne’s hit the wall.
    “It’s not the buyers. I think the buyers are just not being given the finance range they were being given a while ago.”
    Selling agent Rosslyn Mastrangelo, of RT Edgar Bayside, said buyers with realistic expectations would have the advantage in this market.
    12 First Avenue, Kew passed in at auction but has since gone under offer. Photo: Nelson Alexander Kew
    “Vendors are certainly in sync with the market and they are reacting accordingly,” she said. “Clever vendors who understand the market understand that’s an necessary thing.”
    Homeowners in the inner Melbourne region, like Mr Adam, are on average slashing prices by 6.3 per cent on units and 6.9 per cent on houses over the past six months.
    The inner east, home of traditionally strong markets Kew and Hawthorn, is being hit hardest. Prices for houses were being discounted by 7.6 per cent, and units by 6.7 per cent.
    Elena Todorova had her old family home passed in last weekend, too. The price guide was $1.7 million to $1.9 million, but went under offer late this week while listed for $1.65 million.
    She said the response from the market was a shock.
    “We thought we would have got much more based on previous results in the area. It’s a rollercoaster market at the moment and it’s very unpredictable,” she said.
    Ms Mastrangelo said it was too soon to tell where the market was heading.
    “That’s the million dollar question to which we don’t have the answer,” she said. “It’s common knowledge we’ve had a great run for a number of years, but if this a momentary blip or just the cycle unfolding, I just can’t answer that question.”
    The outer suburbs would continue to be strong, Dr Powell said, and were unlikely to see such heavy price discounting in the near future.
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