Victorian property market in slow-down mode

The Victorian property market is set to steady in the coming six months, stabilising the current falling market experienced in the first half of the year, according to First National Real Estate’s 2012 Property Market Outlook Mid-Year Update. 

The Update, released this week, is based on a survey of the 400+ member network, and provides an insight on what member agents expect the market to do, drawing on their experience at a grass roots level. 

Interest rates, buyer confidence levels, the global economy and job security are all influencing the Victorian property market, which will only improve as market conditions improve.

However, the Victorian economy had several years of strong growth, at a time when other states were struggling, so it is now in slow-down mode, which will continue for the remainder of 2012.

What is evident is that for the market to improve, there is a need for competent business and social leadership, which is currently lacking at federal level.

The key challenges for the Victorian property market are vendors adjusting their price expectations to meet market demand, ongoing consumer nervousness, especially resulting from rising unemployment concerns, lack of buyers and stock surpluses, particularly around greater Melbourne and central Victoria.

The Update says the strongest growth will come from the upgrader sector, followed by investors, then retirees and first-home buyers.

Investor activity will increase as a result of improved buying opportunities, better rental yields and increased affordability.

Property prices should stabilise, with some downswings, and price movements will be affected by buyer confidence, interest rates and worsening financial conditions.

The rental market in Victoria is expected to remain relatively strong overall, with ongoing consumer nervousness keeping many in rental accommodation, even in the face of improved affordability.

Interest rates are expected to reduce further, however it is not expected this will impact too greatly on the state’s property market as any gains will be offset by negative market factors.

While lower interest rates will improve market conditions and strengthen buyer confidence, job uncertainty, increasing living costs and tightening lending criteria will all act against this and, for some areas, may result in increased mortgage defaults.

According to the Update, the Victorian office market is set for ongoing turbulence, suffering from the effects of weakened traditional office occupying businesses.  The slow retail sector and rising unemployment as a result of a stagnant economy will be the key significant factors affecting Victoria’s commercial property market in the second half of 2012.

Market confidence and supply and demand issues will continue to plague the rural property market in Victoria for the remainder of the year.

Garry Nash is chairman of First National Real Estate Victoria.