The pent-up demand in the aftermath of Victoria’s Stage 4 lockdown – or the end of it, rather – means both buyers and vendors are motivated, decisive and displaying reasonable expectations when it comes to property. Deals are getting done and clearance rates are at 65-75 per cent, suggesting we should see prices rising.
On the whole, most properties appear to be selling at expected levels with a few anomalies here and there.
Keep in mind, this is a much more positive picture than the headline grabbing 10-30 per cent drops predicted by the major banks and economists back in March/April. Although Melbourne’s property market seems to have been the hardest hit, it has still only registered a drop in property values of 6.9 per cent. On the other hand, regional Victoria is looking positive for property owners who are enjoying both rising values and rising rents.
Shift in priorities
The State Government enforced ‘Work From Home’ order has been the greatest disruptor – or accelerator as some may argue – to hit the Australian workforce since the arrival of the internet. So, it comes as no surprise that the importance of living close to the city has lost its ranking in favour of having an adequate sized family home that caters to the new way of working, a change that looks to be here to stay to some degree
Evidence of this is seen in the rising vacancy rates of apartments which are now at 10 per cent (and rising) compared with 3 per cent pre-COVID.
Stock levels, in general, are down around 30 per cent year on year and if we take into consideration rising rates of vacant apartments, it all points to a real shortage of quality family homes
After seeing the optimism and confidence in the other capitals, we expected Melbourne would have a steady pulse post lockdown. But probably the most surprising revelation is that we are not seeing distressed sales. The expected rushed or panicked selling has been absent; however, we do expect this may change early next year in the apartment market and bigger buildings which tend to be targeted by investors.
What about the rest of Australia?
Owner occupiers are driving the market, with pre-approval data showing investors have dropped 10-15 per cent. But on the back of the stimulus and concessions on offer, first home buyers have picked up the slack, with increased capacity getting them into the market, in some cases, years ahead of what it would have taken were they liable for full stamp duty for example.
This is backed up by RBA figures which show a decline in loans to investors while those approved for owner-occupiers have risen sharply.
Additionally, the ‘rise of the regional areas’ is a trend we have seen growing since 2017, now amplified by the lockdown and virus, to result in transaction volumes, values and rents rising in regional areas, especially those within a 90 minute drive of a capital city.
Affordability is generally the driver of this decision, but lifestyle change, more space and working from home options have really accelerated this trend which is showing in the housing data.
Rapid changes in buyer and seller behaviours
The buying process has pivoted well in the face of a myriad of 2020 restrictions. There are plenty of stories of expats buying ‘high end’ homes from Facetime inspections, or Melburnians securing apartments in the Sunshine Coast or Airlie beach, site unseen. This may waver now that things are getting back to ‘normal’ but the changes the industry has implemented have made online inspections and auctions part of the fabric, and quite possibly here to stay.
The absence of holiday planning and any semblance of a social life has meant buyers and sellers have had more time on their hands to make sound decisions. It’s almost as if we have been able to temporarily stop our world spinning making it easier to navigate one of life’s major decisions. It’s something I doubt we will ever see again.
What can we expect in 2021?
With such low interest rates, buyer activity will be high and if stock levels don’t increase, prices may increase slightly in certain capital cities and regional areas.
We can’t rule out the possibility of distressed sales but the fact is, if the buyers are there you wouldn’t even know!
Lockdown has been the catalyst for longer term lifestyle changes so the sea change and tree change will continue.
On the down side, there is still some more hurt to inner city apartment prices. As supply and vacancy rates rise, investors lose confidence. Lower levels of immigration and interstate travel takes is also an additional sting to the short term stay market so things are not looking great for this segment.
One thing’s for sure, though: it’s great to see Melbourne firing again.