Loan pre-approvals by banks can be confusing. They aren't a rubber stamp to buy whatever you want, but some buyers are being a little too cautious.
REIV September 2011 quarterly update
Saturday saw the release of the REIV’s median price data for the September 2011 quarter. The 2.8 per cent drop in the quarterly median price for houses in Melbourne confirms the trend that prices have been slowly softening since around May 2010. As is often the way, it has taken sellers that long to ‘meet the market’.
In its release the REIV suggests that outer suburbs are performing better than inner suburbs. The stronger performance for fringe suburbs may reflect the changing composition of properties sold in each quarter. As more estates are built in fringe suburbs, the proportion of newer and larger properties sold relative to smaller traditional properties grows. This change in composition drags up the median price, and makes it look like prices have risen more than they really have. It would be a concern if people thought that property in these fringe suburbs are a good investment. Remember, it is these outer suburbs that are struggling with mortgage stress.
Overall, participants in the market will see this fall as another layer of evidence, confirming the softer conditions. We may yet see another small drop in prices before the market plateaus.
However, it is likely that we are close to the point where pricing is more realistic. Should interest rates fall next month, this should stabilise the market, and set the stage for some price growth in 2012. It is very easy to be swayed by this sort of data. But ultimately, for home buyers, if you choose the right property and your finances are in shape, go for it. Similarly, it is always fiendishly difficult for investors to ‘time the market’; but over a 7 to 10 years’ investment time-frame, well located, quality property will out-perform as an investment.
Data source: REIV
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