9th May 2022 / Jeremy Desmier: Market Update | 7 & 8 May 2022

The first auction weekend of May offered cool but beautiful Autumn weather in Melbourne, with just over 1,100 properties scheduled to go under the hammer.

With all the media coverage on the Reserve Bank's decision last week to raise the official cash rate by 0.25%, it was pleasing to still see strong, determined bidding from buyers at several auctions.

The stylish and well-presented home at 2/12 Garden Road in Camberwell attracted four bidders, with the generous size and location being major drawcards. Bidding was exchanged in increments from $10,000 down to $500, as each bidder tried different strategies to get on top. Of course, there can only be one winner at auction, and the eventual purchasers were thrilled to be the new owners of such a wonderful home.

In Box Hill South, three bidders sought to secure the keys for 9 Monash Street, and it's not hard to see why. Boasting a spectacular renovation and extension, the five-bedroom home is in a dream position for families, zoned for Box Hill High and close to public transport. The property sold under the hammer for $2,525,000.

Four bidders participated in the auction at 3A Lithgow Street in Glen Iris, which sold under the hammer for $1,711,000. An exceptional four-bedroom home zoned for Camberwell High, it offered immediate comfort with opportunity to renovate.

Of course, there has been plenty of discussion this week about the cost of living, particularly considering the interest rate rise last week. The REA Group reports that there is disagreement over how fast rates will rise. The major banks forecast a conservative cash rate between 1% and 1.5% by the end of the year, as opposed to a sharper increase suggested by pricing in the future market, which implies the cash rate will be above 2.5% at the end of this year.

In their recent Financial Stability Review, the RBA estimated that a two-percentage point increase in mortgage rates would reduce real housing prices by 15% over a two-year period.

The 'real' part is important – it means if inflation is cumulatively 5% over the next two years, price levels will be only 10% lower than currently. While a sizeable drop, it would only retrace a small amount of the recent extraordinary gains we have seen across the country. A 10% nominal drop would put national prices where they were in the middle of last year.

With auction volumes set to pick up again next week, it will be interesting to see how seller price expectations and buyer depth is tested.

Results. It's a Fletchers thing.