Melbourne on the rise in 2021
As we continue to see auction results peak and the level of devastated buyers increase from week to week, there is a feeling of defeat and we are frequently being asked “when will the madness stop?”. The simple answer is not for the foreseeable future and not until we see stock levels rise and or interest rates rise.
The new FOMO – ‘Fear of moving on’ – has also set in and playing its part in the uplift in prices as this is a major contributor to a shortage of stock. Potential sellers are standing still over selling in a peak market knowing that they will have to buy back in the same market, instead opting to purchase before selling.
Sellers have a common concern that the market is heating up and rightly so, as selling your home prior to buying another in a frenzied market adds further pressure due to settlement deadlines. With home buyer budgets having to be increased on what seems to be weekly basis, the sentiment to wait it out seems to be favoured amongst some, however the flip side of this is the market will not wait and right now time is costing money as buying in becomes more expensive.
What is also been widely spoken about is the relevance of the price guide the agents are advertising and the comparable sales which are used or rather lack of comparable with outdated sales on the SOI or most commonly referred to as the ‘Statement of Information’. These two crucial pieces of information which many buyers have become so reliant upon using as a means of establishing value has for many years been a hot topic of discussion amongst professionals in the industry.
Although many agents are trying to come to grips with the market and doing their best to make more accurate price assumptions, the sentiment is however that under quoting is well and truly back. Reports to Consumer Affairs have again started to flow in with 212 enquiries and complaints being lodged with Consumer Affairs for the period of 1st December 2020 to 28th February 2021 as is the case with a recent complaint lodged to Consumer Affairs for a property which sold in Armadale for $5.8 million off the back of a quoted range of $4 million to $4.4 million.
There is also the simple argument that agents are basing their information on sales dating back up to six months, which is not out of the norm nor going against legislation, however the issue here is that we are now in a completely different market and six months ago Melbourne was still under restrictions. What we expect to see in the not-so-distant future once more recent sales data becomes available are quote ranges coming back into alignment with sales results, giving a clearer indication of true value and vendor expectations.
End of JobKeeper
Another hot topic is how the market will react to the end of JobKeeper which will come to an end by 28th March 2021? As the market rolls on at full steam ahead, we expect that the high demand for bricks and mortar is set to continue. At the height of the pandemic in 2020, predictions of drop of 10% – 20% in home values were unfounded. JobKeeper payments were extended for another six months, however with payments tapered off since October 2020 by a more substantial amount, the flow on effects will be minimal.
The same can be said about the JobSeeker payments which has already reduced significantly in recent months, with no impending impact on the housing market as a whole.
In late March 2020, the original Jobseeker supplement was set at an additional $275 per week. In late September, the supplement was reduced to $125 per week, and it was reduced further to $75 per week through the first quarter of 2021.
However, housing market momentum has increased from September to January, amid the reduction in the supplement. Between the end of September and January, the CoreLogic national home value index rose 3.2%, and rental values increased 2.5%.
Although economists acknowledge that there is some pain to come for those who will lose work, they believe it will have little to no implications for a housing market that continues to gather pace.
According EY Oceania Chief Economist Jo Masters, the housing market absorbed those changes well last year when house prices accelerated, and the economy continued to improve.
“I actually don’t think it’s going to have a dramatic impact on house prices and the housing market. We’ve already had two step-downs in support,” Ms Masters said. “The step-down in October was bigger than the one we’re going to see at the end of this month.” – Jo Masters.
Figures from the Australian Bureau of Statistics show the national jobless rate has dropped half a percentage point to 5.8 per cent in February, its best result since March last year.
Full-time employment lifted by 89,000 and the number of people out of work fell by 69,900 to 805,200 but is still 109,500 higher than February last year.
The national jobless rate has dropped half a percentage point to 5.8 per cent in February
Auction results continue to be the talk of the town and the latest results from CoreLogic show continued market strength at a National level and with the further relaxing of lending laws, experts are indicating further rises in property prices.
Treasurer Josh Frydenberg announced plans to unwind the responsible lending laws in September 2020 as a means to encourage the flow of loans and boost economic recovery and expect this to start as of next month.
Access to loans will be made easier and will in turn speed up the application processing times which have become onerous given the nature of the credit rules. This will allow more everyday buyers access to funds and potentially increase their borrowing capacity across the board.
As reported by Domain, CoreLogic Head of Research Australia, Eliza Owen said anything that enabled easier access to credit would push up house prices.
“Even an acceleration at the rate in which credit flows into housing purchases could have added housing demand and put upward pressure prices,” she said.
Domain’s senior research analyst Nicola Powell said the relaxation of responsible lending laws would ultimately mean an easier and quicker flow of credit which, in the current rising market, would probably push prices higher.
“It is designed to encourage buyer demand and if we encourage buyer demand, that will help drive up property prices and boost economic growth, which is why the government wants to push this through,” Dr Powell said.
February 2021 figures from CoreLogic showed a National price increase of 4% taking an increase of 1.2% since January 2021. Dwelling values continue to deliver unprecedented results with no indications of a letdown.
REIV figures saw February 2021 had a reported 3,112 auctions with a total of 2,648 of these sold representing a clearance rate of 85.1%. Eighteen suburbs across Melbourne saw a recorded 100% clearance rate, led by Hawthorn East with 23 auctions.
Auction activity is increasing as are the number of bidders at each auction. The days of having 2-3 bidders have now been replaced with 4-6m bidders at times more. Active buyers are on the increase with the majority of these being first home buyers strongly followed by home buyers and the return of the investor. This trend is set continue and with a high probability of increasing as the Reserve Bank keeps its cash rate at a historic low of 0.1%. and set to remain low until 2024.
2021 REBAA and PTA Survey
REBAA and Property Talk Australia conducted a survey aimed at the seasoned investor, home buyers and aspiring property investors with the aim of gathering insights and data into what buyer sentiments were throughout the pandemic.
Although a tumultuous year for the property market, low interest rates, substantial government incentives and softer lending conditions, the survey found that only 15% of buyers put their search on hold in response to COVID-19 and also showed that investors will be the dominating force of 2021 with 43% of those looking to buy a subsequent investment this year.
Of those looking to purchase a property in the next 12 months, 49% are interested in purchasing a house, with the remaining distribution including townhouse at 10%, unit at 7%, holiday home at 4% and apartment at 4%. The remaining 26% are not considering a purchase at all in 2021.
In the midst of a difficult buying year, combined with an overall stock shortage, it is evident that buyer frustration is high. From tight days on market to buyer’s agent enquiry levels, the media stories aren’t off the mark when it comes to detailing the seller’s market being exhibited in capital city and regional locations.
Property Management Update
National rent values have risen 3.2% in the year to February which is the highest annual growth rate since March 2021. Unfortunately, along with our neighbours in Sydney we are the only two cities that have seen a decrease (Melbourne -2.8%). It is clear this is a run on effect from COVID that we are still certainly feeling. The regional market in Victoria is however booming as people seek a life outside the city, especially now that so many have the option to work from home. In good news our decline is beginning to stabilise and we are hoping over the next 12 months, with the addition of international travel (whenever that may be!) we will see this head back up.
Melbourne is one of the only two cities that have seen a decrease in rent values, with a drop of 2.8%
The end of March also saw the end of the governments moratorium on rental evictions and rent increases. We are pleased to be running such a fantastic portfolio with excellent tenants that the ban on evictions has not caused our clients too much distress. We will be re-introducing our yearly rent and lease reviews so please look out for this over the next 12 months.
Our team are working hard implementing new procedures for the upcoming rental tenancy act changes, which come into effect from March 29th. It is important to note the changes span the lifecycle of a rental agreement, from before it is signed to after it ends. The new changes aim to expand upon a renter’s (FKA tenant) and rental provider’s (FKA landlord) rights. A few noteworthy changes including keeping pets at the property, issues considered under urgent repairs – now inclusive of air conditioning, pest infestations, mould and damp, and modifications a renter can make to a property without consent. Of course, there are many other changes, 132 in fact, that our team are actively researching and working on to ensure properties under our management are compliant and our landlords are not in breach of their obligations. A helpful summary of the upcoming changes has been provided by Consumer Affairs Victoria: https://www.consumer.vic.gov.au/housing/renting/changes-to-renting-laws/all-changes-in-place-from-july-2020
We pride ourselves on creating an unsurpassed Property Management experience for all clients. If you or somebody you know has a rental property that has been on the market for some time, please feel free to contact Lily on 0437 232 529 for a confidential chat. We pride ourselves on giving honest market reviews and implementing the right strategy to get your property leased in this saturated market.
Did you know?
Residential Tenancies Act changes
Renters can make simple modifications without seeking permission, such as attaching child safety devices or replacing curtains. We will advise tenants moving forward to please advise us that they will be making these modifications, so we can have them on file and checked off at the vacate inspection.
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 Oakleigh East
This home was part of a sub divided block on a good land allotment of 386 sqm with loads of appeal. This property generated a lot of interest with over 16,000 views on realestate.com and over 50 contracts being requested. We took control of the auction early and gradually shook over multiple bidders and secured the property for just over $1M. A great outcome for our client.
Home Buyer in Glenroy
This home was bought at a strongly contested auction. A rare find with a 25 metre frontage, 4 bedroom brick home with 2 driveways, multitude of options, cherry ripe for sub division – walking distance to re-development of Glenroy train station and precinct, freeway access and CBD. A great outcome for our client.
Home buyer in Essendon
This property was purchased prior to auction. A 3 bedroom villa, part of a development of 2 with excellent land in a great street. This was sure to be popular and we were able to move quickly and offer $1M to secure the property without the normal competition prior to auction. The relationship with the agent certainly helped to put our client in the box seat to secure. A great outcome for our client.
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: Be Prepared for Auctions
Learn about comparable sales in the area – types of properties sold in the area, sales on the same street, average sale prices and other information or data that can give you a clear idea of how much this property is likely to be worth.
Know your budget range
Knowing exactly what you can afford and what your walk away price is will help you negotiate and not go beyond what you can afford.
Get to know the agent and auctioneer
Ask the agent for advice about property sales in the area, past sales, the vendor’s circumstances, what they know about the property, an indication of the reserve price, and what terms and conditions might be negotiable.
Talking to the auctioneer prior to the auction is by far one of the best moves you can do. The auctioneer can give insight into the reserve price or they may appreciate the offer to kick off the bidding. Auctioneers also have their own way of conducting an auction and knowing their strategy, style and even a simple hello before the auction can have an influence.
Review the contract
Have a professional review the contract of sale prior to making any offer. There are many ways clauses in a contract can lead to unforeseen expenses or even restrictions on your plans for the property or land. These can come in a variety of forms too: caveats, easements, zoning, development restrictions and more. A professional will make sure there is no limit on the future potential of the land or your enjoyment of the property.
Know if you want to make an offer prior to auction
If you’ve done your homework well, you’ll feel confident about what the property is worth. And if you’re confident this property ticks all the boxes, you may even be able to jump the queue by making an offer before the auction goes ahead.