New CoreLogic data shows that sales activity in Melbourne picked up over August, cooling price growth.
Listing volumes across the city far exceed both 2022 numbers and the 5-year average according to the data on newly-listed properties added to the market during the 4 weeks to August 27 this year.
But while an uptick in supply is good news for the market, the sharp increase in sales activity, particularly in some suburbs, has raised red flags.
Eliza Owen, head of Australian research at CoreLogic, told Domain:
“I think because we’ve had a weird winter that leaves us with a less certain spring [...].
If price growth continues to moderate, as it has in the past few months, people might change their mind about selling if the demand isn’t as strong.”
She added that there were red flags in some areas,
“Where new listings have risen quite a bit when compared to the long-term average and some listings are accumulating a bit as well”.
The number of new listings has been growing each week since the middle of June, and the total number of listings has been growing since the first week of July, CoreLogic data shows.
It’s unusual for listings to rise in winter.
South Darebin in Melbourne’s northern suburbs saw the strongest uptick in new house listings month-on-month, with a 150% increase in the number of listings (55) over the 4 weeks to August 27 - that represents a 174.1% increase from its 5-year average.
Second up is Stonnington West just south-west of Melbourne’s CBD which has seen a 140% uptick in new listings to 60 over the same period - or a 172.4% increase from its previous 5-year average.
Moreland-North had the biggest increase versus its 5-year average, or 212.3%, taking the number of new listings up 55.1% to 76 over the 4-week period.
And despite the increased supply, CoreLogic data shows that Melbourne home values ticked up another 0.5% in August and are 3.2% higher from their February trough.
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The counter-seasonal lift in new listings could be attributed to the positive turn in housing values across most regions since March while historically low advertised supply levels are boosting vendor confidence.
There is a positive correlation between rising housing values and a lift in new listings.
But we may also be seeing more homeowners needing to sell amid a peak in the ‘fixed rate cliff’ thanks to elevated interest rates and high cost-of-living pressures.
Data on mortgage arrears continues to show a historically small portion of borrowers are behind on their mortgage repayments, but we are likely to see mortgage stress becoming more evident through the remainder of the year.
The data shows that the spring season is shaping up to be busy, making up for the relatively quiet spring and early summer selling season last year.
A rise in stock levels could also dampen price growth across Australian housing markets as buyers benefit from more choice and demand weakens.
As I always say, when it comes to property investment, the focus should be on investment-grade properties in A-grade locations.
Never follow a trend or buy in hotspots or growth areas because these won’t give you the long-term growth that you’re looking for.
I’m talking about areas and properties which hold their value over the long term, rather than benefit from an uptick in demand.