Experts warn surge in number of properties for sale could force house prices down

Experts say a flood of new properties coming on the market in the Australia’s hottest markets could lead to a fall in house prices over the coming months.

The comments come as new Real Estate Institute of Victoria figures reveal the number of properties on the market is growing despite clearance rates dropping from over 80% to around 73% in just a few weeks.

SQM Research founder Louis Christopher says more owners are looking to sell their properties, especially in Melbourne, in order to take advantage of extreme price growth during the past year.

“We are noting an increase in the amount of listings in all capital cities, and it’s definitely up on the 2009 levels. I believe that more and more vendors are looking to sell their properties,” he says.

New figures from the REIV show 924 auctions were reported over the weekend, with another 900 auctions expected next weekend and a record 1,000 expected in two weeks’ time, after the Queen’s Birthday holiday weekend on June 12-14.

“I think vendors are realising this is as good as it gets, and if they want to get a good price then they need to sell now. Normally during the period of winter you see volumes drop off, so if we were to continue to see these types of results in June, that would be abnormal.”

Additionally, Christopher says prices could drop as vendors realise demand has dropped and buyers aren’t willing to pay as much as they used to.

“Vendors aren’t realising this at the moment, they don’t understand what is happening and think demand is still high. I would argue that over the next few months, so many more properties will come on the market and vendors will start to understand and adjust those prices.”

David Airey, president of the Real Estate Institute of Australia, also says there could be some corrections over the next few months as vendors start to realise demand isn’t as high as they would like.

“The lowering of clearance rates over the past few weeks shows that demand is tapering off and prices aren’t meeting buyers’ expectations.”

Airey also said more sales are expected in Melbourne, where property owners hope to make the most of 20+% price increases over the past year.

“It’s always difficult to know what motivations are for selling, but it could be quite likely sellers think the boom can’t go on forever and want to take the money and go. This could be the case due to the high number of auctions.”

The REIV figures show 924 properties were put on the market over the weekend, with a clearance rate of 73%. At this time last year, 667 properties were put up for sale with a clearance rate of 82%.

The total value of auction sales reached $497.27 million, with the total value of private sales reaching $322.03 million.

In Sydney, the biggest property market in the country, 259 properties were put on the market with only 181 selling, indicating a clearance rate of 64%. Total sales reached $133 million.

Brisbane had just seven properties sold at auction out of 18 on the market, with total sales reaching just over $2 million. Adelaide saw 10 properties sold, with a clearance rate of 42% and total sales worth $3.8 million