Recent data released by CoreLogic puts into tangible terms the significant downturn faced by one of Australia’s largest markets – over the course of 2018, the clearance rate of Melbourne fell by 22%.
Last week, a realestate.com.au report acknowledged the existence of a real estate downturn, but labelled it overblown, suggesting that while some of the country’s larger markets are faltering, consistency among smaller markets is lending brighter hues to the larger picture.
Overly quick predictions and inaccurate figures were labelled as the cause for the exaggeration of the downturn – however, CoreLogic’s recent figures cannot be labelled as such. An undeniable and significant downturn is observable, between the 68.1% clearance rate recorded throughout the final three months of 2017, and the 45.8% rate recorded in 2018’s final three months.
Realestate.com.au report that several big names in real estate have offered explanations for this downturn, ascribing the dip to buyers’ relationships with banks, financial approval proving increasingly time-consuming and fickle.
Australian head of real estate Geoff White and Mortgage Choice chief executive Susan Mitchell each point to the discrepancy between the duration of auction campaigns and home loan assessment periods. Where agents’ campaigns typically last roughly four weeks, the time taken for bank approval, which was previously 10-12 business days, often cannot be completed before auction.
To explain these expanding timelines, Ms Mitchell points to recent increases in the tightness of money-lending.
“According to our network of brokers in Melbourne, the tightened lending environment that developed throughout 2018, and is likely to persist in 2019, has meant that the timeline for loan pre-approvals has lengthened.”
In assessing and confirming factors such as living expenses, Ms Mitchell says, “It is not a matter of providing a ‘guess’ or ‘estimate’ when applying for a home loan; it needs to be factual and exact.”
In an unconditional auction, where a contract of sale is immediate and binding, buyers are reportedly increasingly wary of the bank changing its mind.
The figures resulting from these cautious banks and wary buyers make clear the severity of the slump in Australia’s largest market – also emphasising the resilience of smaller markets, which buoyed the national economy.