Are we on the cusp of a boom?
It is incredible how quickly sentiment changes. The questions being asked early last year during covid was how far the market was going to drop, but it is all about the strength of the market and how far it is likely to rise in 2021.
Tim Lawless from Core Logic commented this week that, “Record low interest rates played a key role in supporting housing market activity, along with a spectacular rise in consumer confidence as COVID-related restrictions were lifted and forecasts for economic conditions turned out to be overly pessimistic. Containing the spread of the virus has been critical to Australia’s economic and housing market resilience.”
While CBA Head of Australian Economics Gareth Aird wrote, “Near term indicators of momentum suggest conditions will further strengthen”.
Record low interest rates played a key role in supporting housing market activity
Lockdown 3.0 has certainly not had an adverse effect on the Melbourne property market, in fact quite the contrary. The continued low levels of stock, low interest rates, which The Reserve Bank have indicated will see us through until 2024 and an uplift in buyer confidence has made the pivot back into a sellers’ market all the more apparent.
We are witnessing some very strong results not only in the Melbourne market but at a national level, with this trend forecasted to continue well into 2022. Overall, in the three months to January, dwelling values rose in every market with Melbourne seeing an uplift of 2.1% and Regional Victoria at 4.8%.
With further indications of growth from Commonwealth Bank economists forecasting an 8 per cent rise in national dwelling prices in 2021 followed by a 6 per cent increase in 2022. House prices are tipped to rise by approximately 16% and the apartment market around 9% forecasted for the next 2 years, contrary to previous predictions of a risk of a 30% fall in prices.
January 2021 figures from CoreLogic showed a National price increase of 2.8% taking dwelling values to an all-time high and with all indications cementing industry sentiment that we are expected to see continued periods of strengthened conditions.
CoreLogic showed a National price increase of 2.8% taking dwelling values to an all-time high
With confidence in the Australian housing market due to remain at an all-time high across all property markets, it has become apparent that the detached dwelling market is dominating the unit market partly due to a change in living preferences directly related to the impacts of COVID-19, heightened vacancy rates within the apartment segment and move to larger premises with additional living and accommodation requirements.
CoreLogic data estimated 459,308 properties transacted across Australia in the year leading to January 2021 with most of these sales being houses, rather than units. Although it is not unusual that the majority of property transactions are houses, the share of houses as a portion of sales increased to 74.2% in the year to January 2021, up from 73.2% a year ago and 66.7% five years ago making up an average of 70.2% of annual sales over the past decade. That’s 2.9 house sales to every unit sold.
January 2021 saw a reported 600 auctions, which is the highest ever for the month of January and with a total of 506 of these sold representing a clearance rate of 84.3%. Thirteen suburbs across Melbourne saw a recorded 100% clearance rate, led by Bentleigh and Richmond.
Auction activity has picked up earlier than expected in 2021 with auction clearance rates in excess of 80% for some consecutive weeks now which is clear indication that the number of active buyers outweigh the number of suitable properties on the market for sale.
During the 2020 restrictions, we saw agents scrambling to implement strategies and systems which would enable auctions to be conducted online and as we commence a new year of uncertainty, we are seeing live auctions returning with the easing of restrictions. Although we are also witnessing hybrid auctions where the auction is held on site with the added option of being able to engage and bid via Zoom or other online methods as opposed to physically attending. This has allowed agents and buyers more flexibility whilst also being able to ‘pivot’ quite quickly if and when the need arises.
The speed at which properties are now being sold has also gained momentum as FOMO (fear of missing out) becomes more prevalent amongst buyers. Campaigns more often than not are scheduled to run their full 4 week run, however there is also a high probability that the property can be sold prior to the auction date and purchased at a level acceptable to the vendor and this usually indicates that the offer placed was at or above the top end of the quoted range.
A property is now up for grabs the minute it is up for sale! Last minute boardroom auctions and counteroffers are fast becoming the norm.
A multitude of stimulus packages are currently on offer as a means to kick start the economy and provide much needed assistance to first home buyers, however this has caused adverse effects as it has added fuel to the fire and as a result buyer’s budgets have increased and with this an uplift in property prices, increased heated competition and the return of investors and international buyers.
So, what’s on offer?
- First-home buyers get a $10,000 First Home Owner Grant (FHOG) in Melbourne, or $20,000 in regional Victoria, from the state government if they buy or build a new home for $750,000 or less.
- The federal HomeBuilder grants scheme adds another $15,000 to $25,000 to all homebuyers’ budgets if they build new for $750,000 or less or renovate an existing home for $150,000-$750,000.
* Note – On 29 November 2020, the Australian Government announced an extension to the HomeBuilder program to 31 March 2021.
- The First Home Loan Deposit Scheme allows eligible first home buyers to get a home loan with just a 5% deposit and avoid the extra cost of lenders mortgage insurance (LMI). Lenders usually charge LMI to borrowers with deposits below 20% of their property’s value.
- Stamp duty reduction of 25% for existing dwellings and 50% for newly constructed homes up to the value of $1M.
* Note – The deadline for this is the 30th June 2021.
Property Management Update
Things have not slowed since returning to a busy start to 2021.
Open homes are running and we are starting to slowly see more people viewing their potential new home. Our team are focusing on leasing our available properties to the right tenant at the right price as quickly as possible – we are monitoring the market and ensuring our landlords are provided with honest advice so we can focus on minimising vacancy in between tenancies.
The vacancy rate across metropolitan Melbourne rose to 5.9% over the month of January 2021. The biggest increase in Melbourne’s sub-region of 7.6% for inner Melbourne, followed by middle Melbourne with 6.1 1% and outer Melbourne rose to 2.3%.
Our team are focusing on leasing our available properties to the right tenant at the right price as quickly as possible.
Our team continue to attend available training for the upcoming changes to the Residential Tenancies Act which are due to take place at the end of March 2021. We will be ensuring all of our landlords are across these changes and their properties are up to the new compliance standards.
We pride ourselves on creating an unsurpassed Property Management experience for all clients. If Covid-19 has left you questioning what it is that your Property Manager does, please feel free to contact Lily on 0437 232 529 for a confidential chat. We welcome your enquiry.
Did you know?
Residential Tenancies Act changes
Urgent repairs now include repairs or replacements relating to air conditioning, safety devices, pest infestations or mould.
The market has been extremely strong however we have still been able to secure a number of great options for our clients. We have listed a couple of examples below.
Home buyer in Glenroy
A warm congratulations to our expat investor who came to us wanting to secure our services for Buyers Advocacy as well as Property Management, as they wanted a full service knowing that their investment would also be managed with care and professionalism.
The brief although not complex, came with a list of specific criteria which had to be met, and after some tough vendor/agent and advocate negotiations, we managed to secure a fabulous investment grade 3 bedroom, single level villa unit within close proximity to all amenities that is also set to perform very well over the years to come.
Home Buyer in Hampton
Knowing market values, asking the right questions of the selling agent and thorough due diligence, put our clients in the box seat to secure this one. Up against 6 bidders in total, Buyers Advocate opened the bidding at $1.6million. This was the bottom end of the selling agents quoted price range. The bidding rose quickly to $1.7million where the property was announced “on the market” “unreserved”. Bid against bid, it all started to slow at $1.85million. Reading the play, Buyers Advocate became even more aggressive with their bidding calls and showed that bidding experience counts, when dealing with nervous competition. Buyers Advocate secured the property for $1,890,000, which was well under our client’s maximum budget.
Our Vendor Advocacy Services
Did you know we offer Vendor Advocacy?
A service within our broad range of offerings is Vendor Advocacy. We can assist clients in taking the time, stress and pressure out of selling a home or investment property, delivering focused experience and expertise in all aspects of a property sales transaction.
We are able to provide an independent valuation of your property. Our Advocates are experienced advisers who will guide you objectively through the sales process.
Our role as a Vendor Advocate is to act for the seller, to appoint a suitably qualified real estate agent. This ensures at all times that selling agents do what they say they will do, charge a fair and reasonable fee for their services, act impartially when introducing buyers and market and promote your property professionally and effectively.
Our fee is deducted from the sales commission, so it won’t cost you anymore to engage our service to assist you to sell your property.
Let us help you sell your property. Contact one of our experienced Buyer’s Advocates on (03) 9818 4499, for an obligation free discussion.
Tip of the month: 5 Steps to Buying Property
Step 1 – Do your research
Far too often, property investors rely on what the selling agent says about a property and/or area. They may tell us about positive aspects about a property but not mention the negative points. We must remember that selling agents work for the seller, not the buyer. That’s why you must do your own research and due diligence.
Step 2 – Visit the area
We’ve found that some of the best research is conducted whilst ‘on location’. We may do extensive research on the internet and read reports however area knowledge and relationships local agents are paramount to unlocking the best buying opportunities and knowledge of good locations vs not so good ones. There’s nothing like seeing an area/property with our own eyes to form a complete picture about a suburb/district.
Step 3 – Seek expert advice
Whether you’re buying locally or interstate, it is imperative to consult with your accountant, financial planner, conveyancer or buyers advocate. It is important to have knowledge of the specific ‘rules’ that may apply to purchasing the property – for example: cooling off rights or any unsavoury contract clauses contained which may catch you out. Remembering that a Contract of Sale or Section 32 is a legally binding document.
If you’re unsure about the property/area/buying process, I’d suggest you speak to a reputable and experienced Buyers Advocate. You may have to pay for this but at least you know that they’re working for you and providing advice that will benefit you.
Step 4 – Do your due diligence
Due diligence goes beyond a 30 minute inspection. It is a thorough analysis of the suburb, assessing comparable sales and listings, investigating a vendors and the competition’s circumstance, review of contracts and conducting building inspections only to name a few but most importantly asking the right questions and knowing the market drivers in the area. Pricing the property correctly and knowing how the agent conducts their sales process is paramount in securing a property at the best possible price.
Step 5 – If you don’t feel confident, use a Buyers Advocate
Many property buyers are now becoming familiar with concept of Buyers Advocacy and the crucial role it plays in not just assisting with securing a property but sourcing and securing the best property at the best possible price and along the way saving clients from making costly mistakes. Buyers Advocates are professional property buyers who only work for the buyer and are experienced negotiators with many years real estate knowledge on their side which puts their clients at a distinct advantage when it comes to purchasing property.