By Robert Larocca

Melbourne transaction numbers slowly rising

While it’s often not obvious, a sign of a poorly performing property market can be a low level of residential sales. It reflects a low level of confidence, owners may be relucent to sell for fear of achieving a low price and buyers may also be reluctant to make the significant commitment that is required when entering into a home loan.

Low transactions levels have a range of negative consequences; professions related to property suffer, state government incomes drop and buyers can find it more difficult to find the right home due to a lack of choice which is the reason why the number of transactions is an important metric to follow if you are interested in the state of the market – sometimes it can be even more important than prices.

For the Melbourne market, the current level of transactions suggests a healthy market below its peak. The first indication of this is that home values are at a peak in nominal terms but are still around 3 years worth of inflation below their value in real terms.

The second indication is that the overall number of settled sales at the end of April was only 1.3 per cent higher than a year ago. This is better than 2012 by a reasonable 4.4 per cent but well below the all-time record in 2007 when there was 105,194 sales in Melbourne and four months into this year we are still 22.2 per cent lower.

This data may be surprising to anyone who has seen the record number of auctions this year but as that only accounts for around 31 per cent of sales it can’t provide an accurate picture of the entire market.

Robert Larocca
RP Data Victoria Housing Market Specialist

Source: RPD

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