They say the darkest hour of night is just before dawn. 

After 10 consecutive interest rate hikes in 10 months, are we finally seeing some daylight, at least when it comes to certainty around borrowing costs?

Should we just round it off to four percent and call it a day? 

Historically, a four percent cash rate is not even that high. It just seems high compared to the 0.1 percent we became accustomed to during COVID.

Either way, buyers seem to be getting on with things. 

Clearance rates jumped again on Saturday, with Jellis Craig having a bumper weekend at 87 percent across the network, with the majority of properties selling under competition with multiple bidders. 

That just doesn’t happen in a declining market. 

Buyers have started commenting again that everything seems to be selling above the range. 

Contrast this to the middle of last year when most buyers were suggesting they hadn’t seen a single bid in weeks, and were expecting to be able to buy at the lower end of the range, or below.

So what is happening? Is the market on the rise? Have we already seen the bottom? 

I’m not here to make predictions, only observations. 

The Stonnington market peaked in October 2021. 

2022 started well and then slowly lost steam, with prices, volume, and clearance rates decreasing deeper into the year. 

We have observed unrenovated homes and land selling for 10, 15, even 20 percent less than what similar properties were achieving in the FOMO frenzy of 2021. 

On the other end of the spectrum, A-grade, fully renovated homes haven’t seemed to drop much, if at all, with buyers willing to pay a premium to avoid ballooning construction costs and the associated heartache that often comes with planning and building. 

Most properties in the middle of the spectrum (including homes needing work, apartments, and townhouses) have seen price corrections of around 10 percent, on average, over the last 16 months. 

The volume has not yet recovered, but competition and clearance rates have seen a clear bump in 2023. 

We have now seen clearance rates at or above 80 percent for four weeks in a row, with a sample size of over 300 auctions throughout our 30 office network. 

Our Hawthorn office had a 94 percent clearance rate on Saturday with an average of over three bidders per auction. One property sold a million dollars (25 percent) over reserve. 

Looking at past market cycles in Melbourne, such as the Royal Commission induced 2018/2019 slump, and the GFC, prices tend to soften for around 18 months (and roughly 10 percent) before picking up again. 

If history repeats itself, we may well be seeing that same transition right now. We may look back at Q1 2023 as the turning point. 

Or not. 

If volumes were to substantially increase, this would no doubt put downward pressure on prices. If mortgage stress does indeed lead to forced sales, then we may have some tougher times ahead. 

(It might only be 3am with a few more hours to go before dawn).

But let’s not forget this is Stonnington, one of the most affluent, cash and asset-rich municipalities in Australia. Some stressed sales are likely to be the exception and not enough to impact the market in any meaningful way.

More likely stock levels will remain subdued, and prices will remain relatively buoyant until there is more certainty and confidence in the market, and vendors realise that it is once again a good time to sell. 

Only then will we see stock levels return to normal.

Feature Image: 79a Rowena Parade, Richmond

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