Experts play down fears of drop in Melbourne house prices

Source:  http://www.smartcompany.com.au/property/20110418-experts-play-down-fears-of-dramatic-drop-in-melbourne-house-prices-but-say-pain-is-coming.html

Experts play down fears of drop in Melbourne house prices

Property experts say Melbourne house prices are likely to fall in 2011, but have questioned new figures from the Real Estate Industry of Victoria showing an ugly 6% fall in median prices in the March quarter.
Louis Christopher of SQM Research, who is predicting most capital cities will see prices fall by at least 5% during 2011, says the REIV figures – which are based on raw price data, unadjusted for factors such as more sales at the high or low end of the market – can be skewed by big price movements in particular suburbs.
"I don't think house prices have fallen that far in a quarter," Christopher says.
"But the drop in Melbourne house prices is clearly on. The asking prices from vendors have not really dropped that much at this stage but sooner or later, vendors will have to lower their price expectations to meet the market."
Michael Yardney, director of Metropole Property Investment Strategists and a blogger on SmartCompany, has also questioned the data and points out that there are big differences in the data provided by other bodies.
For example, the latest data from the RP Data-Rismark Home Value Index showed prices in Melbourne actually increased 2.5% in February 2011, compared to 2010.
"I didn't believe the REIV statistics for the last year when they suggested the median price in Melbourne increased by 20% and I don't believe their stats now."
Yardney says some segments of the Melbourne property market are clearly going to experience big price drops, but like Christopher argues there are no signs that vendors are being forced to accept big discounts.
"There's no sugar coating it – we are at that stage of the property cycle when there are more properties for sale than there are buyers. This means we are in a buyers' market."
"But there are no desperate sellers giving away their properties at 20, 30 or 40% less than last year."
While Christopher has predicted falls of 5% across most capital cities – including Melbourne – he does have some concerns falls could be greater than this.
For example, in Melbourne he says there is more stock on the market in Melbourne than in the second half of 2008, when prices fell 5% in six months as the GFC hit some home owners.
"It is, right now, oversupplied with current listings. And if that continues we will see further falls."
In addition, the home lending figures suggest that demand is now lower than in the midst of the GFC in the second half of 2008, suggesting prices across the country will be under pressure.
Auction clearance rates remain less than impressive around the country.
In Sydney, figures from Australian Property Monitors show 291 properties were sold under the hammer at a clearance rate of 55%.
In Adelaide, 25 properties were sold at auction for a clearance rate of 45%, while in Melbourne 445 properties were sold at auction for a clearance rate of 62%.
However, the REIV said this was sharply down on the 83% clearance rate seen at the same time last year.

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