The Melbourne property market this year has contained some surprises. On the one hand, the number of auctions is well down on the last few years; on the other, activity in the private sale market is up.

Results reported to the REIV − and analysis of the market over the last few months − has shown that the major impact of problems in the economy has been in the upper end of the market, and that is confirmed by the popularity of more affordably priced homes sold privately.
One illustration of the shift in the market is a comparison of the total value of the sales by method.

The REIV has recorded just over $2 billion worth of private sales, compared to $1.7 billion last year. By contrast, there has been just under $1 billion worth of auction sales, compared to $2.2 billion last year.

Despite the drop in value of sales, the auction market has proved remarkably stable this year with a clearance rate of over 70 per cent for each weekend when there has been more than 100 auctions held, in part due to low levels of supply and vendors of properties for sale before Easter will be hoping that remains the case.

In light of the soft economic conditions the fact that private sales have increased is remarkable and is no doubt due to a number of factors. In the first instance, the increased government financial assistance for first home buyers has helped to bring new buyers into the market − and those buyers are looking for affordably priced homes. A second factor is the substantial reduction in interest rates, which has lead to significant improvements in overall affordability.

The third factor is that there is just generally more demand for affordably priced homes rather than expensive ones, due to the position of the economy.

Written by Enzo Raimonda, CEO of the REIV