As we head into the winter months, a time when real estate traditionally sees less listings, fewer transactions and the cooling down of buyer activity, it seems that once again 2021 is the year that ‘out with old and in with new’ rings most true, or at least in the property world!
It seems that Australia as whole can now be described as a National hotspot and one that has sparked national property panic buying, pushing prices to rise at their fastest rate in 32 years and dropped days on market to record lows.
We continue to see on the ground frustrated home buyers navigating the faced paced seller’s market and questions on many occasions their reasoning and motivation. The one thing that is clear however is that, not only are they dealing with the selling agents, who’s only objective is to extract as much money from them as possible but also dealing with vendors who have the market completely on their side. That is basically two against one making the journey all the more complicated and emotional.
As recently reported on realestate.com.au and CoreLogic, buyers are now paying the equivalent of a buyer’s agents fee (plus more) each month in a bid to secure a property but without the benefits or professional guidance of an expert. Australia’s property prices are rising at their fastest pace since late 1980s and with national dwelling values jumping up by 2.8 per cent in March alone, that’s more than the typical 2 per cent of the purchase price that buyer’s agents would typically charge and with this also brings a cool headed approach to property transactions.
The ability of a buyer’s agent to have tough conversations, strength, expertise and professional alliances in a heated seller’s market as we are now, places buyers in a more powerful position. It also gives confidence knowing that the transaction is a strategic and calculated one which will provide long term results rather than a frenzied buying process driven by FOMO.
The lead up to Easter saw the number of listings on the market rise slightly to 1.5 per cent and holding steady. There is still a considerable shortage of stock which continues to translate to stronger price growth but at what point is affordability going to bite, particularly in the first home buyer market?
With low listings over most state capitals, the danger is that the shortage of stock could continue to spiral and the lack of supply as reported in last month’s newsletter dissuaded potential vendors from putting their properties on the market in the event that they can’t find anything to buy. On the flip side to this, with some would be vendors now bearing witness to the heightened market, the momentum moving forward should encourage more people to put their properties on the market with the view of getting more than what they would have a year ago.
How Do We Compare To Previous Highs?
Newly released CoreLogic data saw Melbourne dwelling values reached a peak in March 2020, after recovering an 11.1% drop in values between late 2017 and mid-2019. The Melbourne housing market was the most impacted of any capital city by COVID-19, due to extended social distancing restrictions through 2020. Closed borders created a negative shock, with a more significant and direct impact on inner city rental demand. Since bottoming out in October 2020, as stage 4 lockdowns began to ease, Melbourne dwelling values have climbed 0.7% above the pre-COVID high.
As the value of Melbourne housing nudges over its previous peak, however the market has not recovered evenly. House values remain -1.8% below November 2017 values due to a larger correction through the recent downturns. As of March 2021, the higher end of the market (measured as the top 25% of values in Melbourne) was still -4.0% below its record high in October 2017, whilst the low and middle tier values have increased beyond their pre-COVID highs by 4.9% and 2.2% respectively.
It is interesting to be able to see the movement of the Melbourne property market since March 2019 downturn through to the June 2019 recovery phase to where we are today post COVID restrictions. Understanding the drivers and subsequent reactions such as price growth is an important part of the property journey. Below is an extract from Dr. Nicola Powell – Senior Research Analyst at Domain.
March 2019: Tumble
Melbourne house prices reached a trough in March 2019, down 9.5 per cent year-on-year to $816,252. From a peak in December 2017, house prices tumbled 10 per cent, shaving just over $90,000 from the median house price. Across Melbourne, 65 per cent of suburbs recorded a fall in the median house price, and almost 21 per cent of the suburbs mapped experienced double-digit percentage declines.
June 2019: Recovery
The more expensive suburbs in the inner regions of Melbourne led the downturn and hit a trough sooner than those in outer suburbs. Inner Melbourne suburbs also led the recovery, with the rate of decline easing and some even starting to increase. A weak point was hit by September 2019 when prices fell in 91 per cent of suburbs mapped in the outer east, 95 per cent in the south east and 86 per cent in the north east. The rebound in prices gained significant momentum as 2019 unfolded. By December 2019, 70 per cent of inner urban suburbs experienced growth.
March 2020: Peaking
By the first quarter of 2020 Melbourne house prices hit a new record high, at $907,643, up 11.2 per cent year-on-year. All of the inner urban suburbs mapped recorded price growth, and 79 per cent in the inner east and 88 per cent in the inner south, highlighting how the premium end of the market leads the price recovery. South Yarra, Toorak and Hawthorn recorded some of the largest price gains, they led the downturn and therefore had more to recover.
June 2020: COVID-19
Melbourne’s price upswing came to a screeching halt in June, the first quarter to show the impact of COVID-19 on housing values. House prices declined 3.2 per cent or $29,000, the first fall since early 2019. Prior to this, Melbourne house prices had made a full recovery from the 2017-19 slump. At a suburb level the improvement in price started to ripple more broadly across Melbourne. Many middle and outer suburbs continued to experience price rises, still recovering from the previous downturn.
December 2020: Peaking
The fall in Melbourne house prices was short lived. By the end of 2020, the median hit a new record high of $936,073 – $28,000 above the previous record in early 2020. Despite the economic shock of COVID-19, Melbourne’s housing market defied the odds. First-home buyers became active, utilizing incentives, low mortgage rates and a deeper savings pot as COVID restrictions reduced spending. House prices rose across 91 per cent of the suburbs mapped. By December, substantial price rises were recorded in Portsea, Flinders, Ventnor, Blairgowrie, McCrae and San Remo on the Mornington Peninsula. Lifestyle and holiday locations are beginning to accelerate in price as working remotely becomes normalised and
international borders remain closed.
Figures from CoreLogic showed as expected a national price increase of 5.8% in the three months leading to March 2021 with the Melbourne dwelling values increasing by 2.4% in March 2021 taking Melbourne’s values at a record high.
To put this into perspective, Jan 2021 – Mar 2021, Melbourne property prices have increased by 4.9% and a home buyer with a budget of $800,000 who hasn’t yet purchased will potentially need to find an additional $39,200 or have been able to save $13,066 per month.
REIV figures saw March 2021 had a reported 4512 auctions with a total of 3787 of these sold representing a clearance rate of 83.9%. Sixteen suburbs across Melbourne saw a recorded 100% clearance rate, led by Lalor, Croydon, Rowville and Abbotsford.
At a suburb level, Reservoir had the most amount of reported auctions for the month at 96 followed by Glen Waverley with a reported 74 auctions. Of these, 51 Wilson Road in Glen Waverley saw a total of 200 bids by 2 bidders fight it out over a 5 bedroom family home driving it past reserve by $250,000 over the weekend at the hour long auction. Dexter Prack of Harcourts Judd White finally knocked the hammer down at $3m. The south eastern suburbs are seeing families and first home buyers driving the bulk of the competition with investors and developers following suit.
Property Management Update
In the year leading up to March 2021, asking rents in the inner-city suburbs of Melbourne dropped -18.9% over the year ($475pw down to $385pw). In saying this, we are slowly but surely making some movement into a recovery stage. This is very welcome news for our property management team and our clients.
The total available properties for rent across Melbourne is falling – the amounts of listed rentals declined -9.4% across inner Melbourne in the last few weeks. This is fantastic news as if we have leased your property over the last 12 months you know we have put together specific strategies in order to overcome this very hurdle. Whilst its fabulous to see this finally dropping it is important to note the number of available unit rentals still remains 121% higher compared with March 2020; we still have a way to go.
The amount of property available is a true indication of how important it is to have a set campaign plan in order to get your property leased and minimise vacancy. We had excellent outcomes in March with 10 happy renters (FKA tenants) moving into properties – most of these located within inner suburbs of Melbourne.
Our Property Management Team prides ourselves on bringing you a tailored experience when it comes to being an investment property owner. It is as important to us as it is to you that your property succeeds in this rental market. 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 on how easy it is to move to Buyers Advocate Property Management.
We extend a very warm welcome to our newest team member Liz Haughey. Liz is experienced in property management, office administration, customer service and is passionate about building positive relationships. Liz will be providing support to all areas of Buyers Advocate. In her personal time, Liz loves to try out new recipes and has promised our team her famous caramel slice! We are so excited to have Liz’ smiley face, approachable personality and can-do attitude in our team.
Although the market has been very challenging, at Buyers Advocate we have still been able to secure a number of great properties for our clients. Here are a few below:
Home purchase – Hawthorn East
Purchased a beautiful family home for a great price in a premium pocket of Hawthorn East. We were able to secure this home through our strong agency relationships and ability to understand vendor motivations who were under some pressure to sell so they could compete for another property. This was all negotiated without the normal competition in a strong market. An excellent result.
Investment purchase – Carnegie
An investment worthy of attention. This property has limitless value add potential for our clients. Located in a desired location, close to amenities and transport, this unit consists of home sized floorplan, own street frontage as it sits to the front of a subdivision of only two properties on a combined 1177m2 allotment of land. This was purchased under auction conditions and well below our client’s price expectations.
Investment purchase – Richmond
This single fronted, 2 bedroom period home ticked all of the boxes for our clients and secured at a hotly contested auction with six very active bidders on the day. Our strategy on the day helped secure this gem which is ideally located in one of Richmond’s best wide leafy streets.
Tip of the month: Land Transfer (Stamp) Duty Concessions
With the 30th June 2021 deadline nearing for concessions, there remains little time left to purchase your home or investment property whilst taking advantage of the available reduced fees. All contracts of sale signed on or after the 1st July 2021 will no longer be eligible for waivers at hand.
To recap, the Victorian Government announced back in November 2021 a land transfer (stamp) duty waiver for purchases of Victorian residential property with a dutiable value of up to $1 million.
- For new residential properties, a 50% land transfer duty waiver of the duty otherwise payable applies.
- For existing residential properties, a 25% land transfer duty waiver of the duty otherwise payable applies.
- For vacant residential land, a 25% land transfer duty waiver of the duty otherwise payable applies.
The waiver applies after all other eligible benefits, such as the first home buyer duty concession, the principal place of residence concession and the pensioner concession, have been taken into account. However, the waiver does not apply to foreign purchaser additional duty.
If you require assistance with your purchase in order to meet the deadline, our Buyers Agents at Buyers Advocate can assist. Please reach out to us for a free of charge consultation on how we can assist you.