Then the Reserve Bank released housing credit data that revealed such a small rise in lending that it set a record low for our heavily geared nation. Fewer housing transactions, bigger deposits from home buyers, and people intent on paying off their loans more quickly have had an impact. Households are wary of taking on more debt and home buyers are holding out for interest rate cuts in response to the slowing economy and market jitters overseas. Just to emphasise where things are really at, property analysts RP Data released figures showing real estate sale volumes were 18 per cent below the five-year average.
Homes are taking longer to sell and vendors are giving larger discounts. Across the nation's capitals, it now takes 55 days on average to sell a house, compared with 45 at the same time last year. Vendors are discounting properties up to 7.2 per cent from their initial price.
Those national figures did not necessarily show up in Melbourne, said Mike McCarthy whose Barry Plant franchise has a 12 per cent market share in Melbourne. Sales at Barry Plant's Eltham office rose 14 per cent over the year to June, but volumes across the network fell 14 per cent, 4 percentage points below the national figure.
''Consumers are being pretty smart at the moment,'' Mr McCarthy said, ''and spring is going to present some terrific buying opportunities. Vendors are going to have to be more realistic than they were in the first part of this year when memories of a boom market were still fresh in everyone's mind.''
Vendors are not the only ones likely to be unhappy about this. The Real Estate Institute of Victoria estimates the value of transactions dropped by 13 per cent last financial year compared with the year before. That has the potential to blow a $700 million hole in the state government's budget estimates.
Grattan Institute economist Saul Eslake said that when sentiment turns and buyers lose confidence ''what drops most of all is turnover, not price''.
''There's not a lot of forced selling going on. That's a good thing, but it does mean the adjustment process is likely to be drawn out.''
That ''adjustment'' had been evident all year, buyers advocate Mal James said. Nonetheless, a surge in quality properties for sale in some of Melbourne's top-end suburbs last weekend resulted in the best result of the year. In the $3 million-plus price range, 22 bidders competed for 11 homes that sold for a combined $55 million, Mr James said. Asked if that energy would continue into spring, he replied: ''Who knows? The market's very healthy when good-quality property becomes available but we're still on very low stock levels.''
Economists and property analysts suggest values will stay flat or fall for some time to come. A weakening local economy and slow employment growth would cause ''further downside risks to dwelling prices in the near term,'' an ANZ bank research note released midweek suggested. And what will it take to change consumers' minds and turn sentiment? Three things, according to Mr Eslake. A further decline house in prices, lower official interest rates, and a lifting of the uncertainty over the global economy.
''I don't think any of those things is going to provide a trigger any time soon,'' he said.
Source: The Age