According to the REIV and many property industry experts, there are a number of trends that will influence the local residential property market as 2011 unfolds.
Interest rates and housing affordability
Even though house prices have stabilised somewhat over the past six months, the cost of home ownership has not. Multiple interest rate increases have not been matched by higher incomes resulting in the affordability of housing being substantially eroded over the past 12 months and creating even more pressure on the rental market. With possible further interest rate increases expected over 2011, suburbs at or below the median will increase in popularity.
Auction stock levels
The REIV says, many home owners looking to sell in 2011 will have watched the performance of the auction market over the last few months and noted the drop in the clearance rate to around 60 per cent. This is likely to lead to a number of sellers looking to use private sales rather than auctions as the selling method in the same way that high clearance rates in 2009 led to more auctions in 2010. This is then likely to increase competition for the homes at auction.
First home buyers
A small increase in first home buyers entering the market in the second half of 2011 is expected, largely driven by the promise of a 20 per cent cut in stamp duty from 1 July 2011.
Population pressure
Ongoing pressure on prices and rental accommodation across all segments of the housing market will still remain, as the ever growing gap between Victoria's population growth and the supply of new dwellings will continue to grow over 2011 and beyond.
Cost of natural disasters
With the recent devastation caused by the massive floods and more recently the worst cyclone to hit our northern shores ever recorded, the drain on our construction industry in Victoria of skilled trades and building materials as the rebuilding programs commence will cause further upwards price pressure on the local Melbourne and Victorian property market. This is likely to last for many years with recent statements coming out of Canberra, that even more skilled workers from overseas will be required.