Strong spring selling season ahead for inner and middle Melbourne suburbs if supply remains constrained: Wakelin Property

Fewer Melbourne inner-city and middle suburban residential listings augers well for rising clearance rate and strong demand in the later months of spring, according property advisory group Wakelin.

“A slower-than-usual increase in new residential property supply in spring may well underpin prices and auction clearance rates in the inner and middle suburbs of Melbourne,” says Wakelin in a new blog.

“Our sense, as things stand, is that spring 2012 will be characterised by reasonably good demand.

“That's based on our experience of the winter market which saw robust competition amongst buyers at many auctions in our inner and middle suburbs off the back of improved affordability stemming from lower prices and interest rates.”

Wakelin says that from discussions with a “broad number of industry colleagues, it looks like supply will be tighter than usual at the start of spring, and that the increase in supply we characteristically see in October may not happen”.

“We could be looking at a late run of supply in November and early December,” says the firm.

If Wakelin is right about demand building and constrained supply, this should result in a substantial rise in auction clearance rates rise and “prices firming with the possibility of some early spring capital growth”.

Melbourne achieved an auction clearance rate of 61% from 466 auctions last weekend, with a median price of $710,000 for houses and $540,000 for units.

Momentum is building in September, with 680 auctions listed this weekend and 740 next weekend.

Wakelin, headed by Melbourne property analyst Monique Sasson Wakelin, expects that recovery is likely to felt first in areas where supply is relatively scarce and finite – “established houses and apartments in our inner and middle ring suburbs”.

“Avoid property where supply is plentiful and theoretically infinite such as high rise apartments in the CBD and properties on new estates in our fringe suburbs.

In terms of price, Wakelin expects the sub-$600,000 market to recover first.

"This is where first home buyers and most investors operate. First home buyers, in particular, benefit most from falling interest rates, given their reliance on borrowing and low equity."

Ahead of the spring selling season, Melbourne online residential listings increased by 5.9% to just under 51,194 properties for sale, according to data compiled by SQM Research.

This followed a July decline of 12.6% with listings coming to a total of 48,322.

Year-on-year, Melbourne listings are up 14.% - in August last year there were 44,859 properties listed for sale in Melbourne.

Burrowing down into the SQM data suggests Wakelin may be right on the inner city with postcode 3000 – the Melbourne CBD – showing 891 listings in Melbourne in August, with listings trending down since about March this year.

Source: SQM Research

A more pronounced trend can be seen in the suburb of Kensington, about four kilometres north-west of the CBD, dating back to October last year:

Source: SQM Research

Listings are also declining in South Yarra, just south of the city:

Source: SQM Research

However some affluent suburbs like Toorak show a big jump in listings in August, well up on August 2011:

Source: SQM Research

Wakelin says that spring is often viewed as a testing ground by prospective vendors and buyers and expects that if the property market perform wells in September performs well in terms of clearance rates and pricing, it may encourage other buyers and sellers into the market.

“A late run to Christmas may also set a positive tone for the 2013 market when it re-opens in early February. And this would augur well for prospects in 2013.”