As Melbourne explores how it will exit its second lockdown, the big question on everyone’s mind is how the city’s property market will be affected.
There’s no doubt the introduction of the stage four restrictions has skewed the key indicators of the Melbourne real estate market. But there is light at the end of the tunnel. While listings are currently down by about 50% in the month to August 23, pre-listing activity is not significantly down on last year, according to CoreLogic data.
After the first lockdown, the property market rallied. But the second lockdown crystallised a decline in some economic metrics, including unemployment, consumer confidence, and population growth. This makes the eventual property market bounce back slightly more challenging.
Spring 2020 and beyond
In August, Melbourne housing values fell by 1.2%, according to CoreLogic data. Given that our market was in a hard lockdown, this wasn’t unexpected, but the result makes you wonder how reflective that figure is.
Throughout the COVID-19 period (between March and August), Melbourne home values have tumbled by 4.6% to a median value of $667,520. The saving grace, however, is that the second half of 2019 (pre-COVID) saw Melbourne property prices jump by almost 10 percent.
Changes in property values
After the second lockdown ends, it’s likely we’ll see pent up demand initially, however this demand is expected to only surface about a week into the post-lockdown period. Most people, families and businesses will need a period ofre-calibration before engaging in property. We anticipate the pre-listing activity will start trending upwards and translate into more property transactions in late spring when increasing demand will balance out supply.
Our belief is that Christmas will trend differently this year. Traditionally, January is a time when city agents take time off, but times are a changing. This year, the week between Christmas and New Year is expected to be the only real respite for the property industry before going back to business as usual.
The housing market has become segmented again. Well-positioned properties in the sub-$2 million bracket are still commanding buyer attention, while the luxury housing market has slowed.
Meanwhile, the apartment market has softened considerably, with a more noticeable downturn seen in the $1 million-plus bracket. A number of developers have hit the brakes on major marketing campaigns temporarily due to a lack of demand.
We cannot look at the selling market without considering the rental market. Understandably, rental values are dropping, with unit rental prices retracting by 4.4% and housing rentals down by 1%.Melbourne’s August vacancy rate is sitting at 3.8%, according to Domain data, and likely higher in certain areas. Yet in the same time last year, the figure was as low as 1.6%.
It is a tricky time for property managers,especially due to the mercurial legislation at the moment. Some glaringly obvious issues that aren’t helping the investor market include the falling overseas student numbers and border closures.
In addition to this, it’s now likely the moratorium on evictions could be extended until March 2021. As a result, landlords are having to negotiate and, for those that have vacant properties, consider heavily reducing their rents – not exactly enticing for the return-focused investor. However,the long-view investor should be able to spot an opportunity with the low cash rate and capital growth prospects.
If you’re a property owner looking to sell, the current environment calls for the need of an experienced negotiator for your high-end property, not simply an order taker. The median price discount on property listings was 4 percent in July, the latest Domain data showed, though it could be higher for those with vacant properties. Expectations for the days on market may also need to be readjusted, as a longer view approach is necessary to achieve the best price for the vendor. Given the changing market, our Vendor Advocacy Arm has re-calibrated according to the requirements of our clients. We only engage senior negotiators who are guaranteed to conduct all buyer appointments personally, along with subsequent buyer follow up.
With the word ‘Zoom’ fast becoming a verb with a new meaning, many workers are embracing working from home, with some large corporations spruiking a continued work-from-home culture post-pandemic. As a result, we have seen an upsurge in demand for tree/sea change locations.
Listing views for regional Victoria soared by about 44% since August 2019, according to Domain. The Mornington Peninsula was particularly popular, with property listing views in the area on Domain surging by about 37% since last year.
“Simply put, buyers are looking to get out of Melbourne,”according to Holly Longmuir,Managing Director of RT Edgar Flinders and Portsea, who has been inundated with buyer enquiries.
“They are reassessing their lifestyles and realising they can work remotely. It gives the opportunity for lifestyle choices.”
Ms Longmuir said there is growing demand for acreages and properties with space in general.
‘Buyers appreciate that overseas travel is off the list for the time being and this provides a stunning alternative,” she said.