The above "title" is NOT my title but that of John Edwards from Residex. In his newsletter of April 2010, I found it to be a very interesting read. I know when I read his newsletter, my eye brows were raised.
Here are some of the key points from his newsletter.
1. Melbourne market may be overheating
2. Any further rise in interest rates may lead to defaults
3. Many might have paid a higher price for property than they should have
As I follow the Melbourne market I am concerned mainly for this market. Readers from other states are encouraged to read up on his newsletter relating to your state or region. This blog is not an endorsement of his newsletter or Residex. I encourage my readers to do your own research.
So why is this article interesting? Well for a start, there are people who has stated that there is not enough properties in Melbourne and they feel that there is a shortage due to the increasing population of Victoria. I have seen that house and unit prices have been increasing and it is rather difficult for first home buyers to enter into the market for a property under $350,000. Yes, some might argue that there still are properties under this range so each property is in the eyes of the buyer, but I am referring to good quality properties which I am willing to move in.
Developers have a nose for these development opportunities and they have starting to invest in producing properties to sell to this market. The question is, has the demand slowed down? This is a rather hard question since there are still a lot of people migrating in to Victoria and calling this state home. The property prices have risen in this state due to the lack of supply of quality properties in Melbourne. So the market dictates the prices, with the highest bidding purchasing the property.
When the demand drops, with the continuing development of new quality homes, we will come to a point whereby the supply will overtake demand and an oversupply of properties will occur. Once this happens, there will be more choices for buyers and buyers can be fussy in find that dream home. Sellers and developers who planned to sell their property at a given price range will start see the change in the buying dollar and they might not get the price they set out to sell.
The inability to sell when required may cause other issues like bridging finance to occur or sales to fall over. People who are reliant on these sales may find themselves in a insolvent position and lenders may start to call on their loans to protect their interests. The rise in interest rates does no help either as a rise in interest rate means a rise in repayments.
So be vigilant when looking for that property especially during this time. Can you still find a bargain? Yes but you will need to do your home work and research the areas and know your prices. Use Residex or other research companies to assist with your research.
