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Premium Property Holding Firm

Early this year a report by ABC News, http://www.abc.net.au/news/2017-12-29/boom-is-over-most-experts-expect-property-price-weakness/9290190 interviewed 5 industry experts on house prices for 2018. 3 out of 5 suggested prices would rise between 0% – 8%; the other 2 predicated a fall between 2% – 10% collectively. Make of that what you will. George Tharenou, chief economist, UBS suggested that “Through next year you’re looking at phase three of macroprudential policy tightening” gee whiz that sounds scary, I said to myself but reading on; what it means is people will be able to borrow less than they could before; Ah well that’s a relief, won’t need to see the doctor for some ointment.  It seems that opinions are divided and depending on who you talk to you can end up chasing your tail in the conundrum of what to do; what not to do; fact is nobody really knows.

Most households are a tad over their heads, negative commentary on house prices and soaring energy costs can be enough for many to stick their heads back inside the shell and wait it out.  Fair enough too, selling a home and then buying another is no small thing.  12 months ago; you could do it with confidence knowing your home would not be on the market too long; and getting the cash to buy another didn’t need going through 5 acts of congress. The landscape has changed; homes are taking longer to sell; deals are falling through; investors are putting their money elsewhere due to the crack down on interest only loans, and new comer’s capabilities are under the microscope with a heightened spotlight on lending due diligence. Many who were thinking of selling are sitting in the corner sucking their thumb. How long will this go on for is another unpredictable science. Louis Christopher, Managing Director SQM Research;  one of the five interviewed for the ABC article; says “The market will pick up a bit in the second half of 2018; on the back of the banks being able to expand their lending books once again. The banks are now under their APRA thresholds and are in a position to open their books” Mr Christopher paints are much brighter and optimistic view than Professor Keen; an Australian Economics Professor currently working with Kingston University in London whose research suggests that more than 1/3rd of current home loans are interest only mortgages. Over the next three years, the terms of these loans will expire and a growing number of borrows will be forced to switch to  principal and interest pushing repayments up by 35% – 50%.  In short this is where much of the fear is located.  Many will need to sell at once putting downward pressure on house prices. 

So what about our little wedge of Victorian heaven. The peninsula, up to now anyway, has remained buoyant, chiefly at the premium end of the market.  There’s no doubting buyer numbers have contracted; this is being felt with property valued at $1,000,000 or less due to the reasons already mentioned, however premium level stock and lifestyle properties seem to be bucking the trend. The biggest factor facing agents at the $1,000,000 plus range is stock shortages. 

Over the past few months; we’ve profiled a good sample size of premium level homes; all of which have successfully sold and most above vendor and agent expectation. Below are few examples:

19 Webbs Lane Somerville Plus $4,000,000
19A Spindrift Avenue Flinders $5,600,000
74 Shoreham Road Red Hill $2,850,000
6 Kunyung Road Mount Eliza $3,590,000
11 Rosserdale Crescent Mount Eliza $3,300,000
18 Stokes Street Flinders $3,590,000

More recently lifestyle properties such as 122 Coolart Road Tuerong sold for $200,000 above reserve and 2 Wonderland Avenue Tuerong successfully sold last weekend for $2,180,000.  58 Duffy Street Portsea sold after auction surpassing $3,500,000, another prominent Portsea home eclipsed $10,000,000 earlier this year and at the beginning of June another Mount Eliza home went past $5,000,000.

Excluding industrial sites and farm land there’s just under 40 properties for sale at $3,000,000 plus across the peninsula.  This is well down from the 80 odd earlier this year; illustrating that a hefty percentage have changed hands.  Market conditions indicate, premium level property is doing well, entry level and investor property is struggling, it’s a pattern across the state and most states in Australia; except for Hobart that continues its upward trajectory. There is some pain around; thats undeniable; however premium property will always be in demand.

Winter stocks are pretty good across the premium peninsula space.  Agents are reporting a slight drop in inquiries, primarily due to seasonal conditions but remain optimistic.  Buyers at the higher end are fussier and this is to be expected; the encouraging sign is that buyers are still looking for stock and this will continue to stimulate the peninsula market. 

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