Investors warned to remain cautious of property market until bargains appear

The latest auction results shows the property market’s winter chill is continuing, but experts say investors shouldn’t rush into take advantage of falling clearance rates and sales results just yet.

Clearance rates might be stuck below 70% in all of the major auction markets, but David Airey, president of the Real Estate Institute of Australia, says now isn’t the time to jump back in.

“It’s probably a little early. While the slowdown is probably seasonal in some respect with the cold weather, keep in mind that finance investment is very hard to get as well. I think there needs to be a little more contraction before people jump in.”

Airey also says that there are signs of investors already entering the market, but he notes that prices are likely to taper off even more and finance is still difficult to come by.

“Larger property investments like multi-unit blocks are currently much, much harder to come by. The market isn’t going to fall so much as slow down, so investors would be well put to wait a little longer.”

SQM Research founder Louis Christopher says it really depends on an individual investment strategy. But overall, he recommends taking some more time.

“If you’re timing the market perfectly, I don’t think now is the time to jump in. When you start to see the RBA cutting rates again, or just about to cut rates, then that might be a point, but it has risks there as well. There’s certainly no rush right now.”

“The bargains are certainly forming, but they aren’t there yet. I don’t think vendors have realised the market is slowing down yet, and haven’t reduced their asking prices. But we will get to that point fairly soon.”

The property market is indeed beginning to taper off. In Melbourne, the Real Estate Institute of Victoria reported there were only 539 auctions this past weekend.
However, REIV chief executive Enzo Raimondo issued an uncharacteristically short statement, perhaps in a sign the country’s hottest market is indeed beginning to experience a slowdown.

Melbourne recorded a clearance rate of only 67% this week, with 355 properties sold and 174 passed in. Total sales came to $226.85 million.

In Sydney, only 216 properties were put on the market with 149 selling, indicating a clearance rate of 64%. Total sales reached $109 million.

In Adelaide, 25 properties were put on the market, with a clearance rate of 69% and total sales worth $7.6 million. Brisbane saw just 16 auctions, with six selling, indicating a clearance rate of 35%. Total sales came to just $2.3 million.