Latest Market News – December 2020
The Melbourne Property Market Finishes the Year Strongly
The year 2020 has been an uncertain time for the Melbourne property market. Despite predictions of large price falls early in the Covid-19 recession, the property sector has come through the crisis in remarkedly good shape. There’s also a great vibe around Melbourne again with retail stores, pubs, cafes and restaurants open for business.
Market recoveries happen from the top – a “trickledown effect”. It starts from the $2M – $4M homes to the bottom end of the market.
We seem to have avoided the economic catastrophes of other countries as our Government and the Commonwealth Bank have helped keep the economy going by offering job and mortgage relief. Back in 2010 when interest rates were at 8%, servicing a $1M loan equated to more than $80,000 per annum. Whereas now in 2020 it is only $20,000 per annum which means you can so much more with your money compared to a decade ago.
Because money is so cheap at the moment it will keep the property market rolling along nicely which explains why I’ve been so busy helping clients buy property and bidding for them at auction.
Pent up demand from buyers, therefore more competition is one of the reasons there’s been an increase in the value of property with many residential homes selling before auction or off-market. This has put vendors in a very strong position and selling agents are using many different strategies to obtain the best results for their clients. For instance they may contact serious buyers and say the vendor is interested in selling before auction creating a sense of panic, time pressure and getting you to show your hand. This is one of the many reasons why engaging a Buyer’s Agent to act on only on your behalf makes sense, we know all the tricks Selling Agents and Vendor Advocates play.
General Market Points
- Melbourne’s property market recovery is well underway.
- Positive property growth has occurred in 2020 in line with other capitals.
- Melbourne’s top end is expected to increase further.
- Family homes priced from $2m to $4m will continue to be in high demand for 2021.
- While low interest rates tend to increase property prices there are other influences including the relaxation of banks’ lending criteria foreshadowed by the Federal Treasurer.
At current interest rates of 2%, it is possible for buyers to borrow $1m with interest repayments of just $20- $25k per annum.
Melbournians have been saving during lockdown. They are now ready to spend on value assets like bricks and mortar.
Most price growth will occur at the top end first then filter down into the mid and lower ranged properties.
The property market has moved quickly into a vendors’ market, however, buyers remain discerning.
While good property is selling at the top end of the buyer range, secondary property, i.e. located on main road, poor orientation or floor plan is flagging. Property incorrectly priced will also be hard to sell.
I have seen an increase in prices for houses in suburbs in the west such as West Footscray, Yarraville, Seddon, St. Albans and Sunshine with the new train line going in and government infrastructure and in the east like Richmond, South Yarra, Hawthorn East, Surrey Hills, Canterbury, Camberwell, Malvern East, Malvern, Kew, Glen Iris, and the south East Brighton, Hampton, and Sandringham. Monthly auction data, sales transactions and clearance rates are all rising in Victoria I believe house prices will continue to rise in 2021 and will continue to the end of 2023.State Government budget announcement of changes to stamp duty, abolished for new property up to $1m and 25% for existing property is also great news for residential property buyers Government incentives, grants, cash savings and federal support are all positive initiatives.
Supply of rental accommodation in Melbourne has increased with more short term holiday rentals coming onto the long term rental market.
Rental vacancy rates in Melbourne for houses have risen to 4.6%.
High rise apartments in Docklands, CBD and Southbank remain high risk for investors with vacancy rates in some of these buildings as high as 20%. Regional housing markets in Victoria i.e. Bendigo, Ballarat and Geelong continue to outperform the growth in Melbourne which will no doubt abate once confidence in the Melbourne market returns.
Purchasers are starting to realise that the high rise apartments whilst bright and new have performed worse in many cases and often plagued by building defects, cladding issues, high owners corporation charges and lack of scarcity.
High rise apartments often reveal building defects, and costly owner corporation fees while the older style flat is usually larger, better built and well located, often protected by height controls, heritage street overlays and close to charming local shops, public transport and lifestyle convenience.
Unlike the new high rise or high density apartment, depreciation has been used up in the older style blocks with most value being retained in the land. Well selected flats that tick all of my specifications are expected to increase in price in the coming years.# Data from REIV
Finally, the team at Your Australian Property wishes you and your Family a Merry Christmas and Happy New Year in 2021. Hope you have enjoyed reading this article and many thanks for your continued support throughout 2020. Thank you!
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