The market continues to be a challenging landscape for vendors and agents alike. The uncertainty partly fuelled by negative property headlines and high inflation rates pose more of a concern to buyers than the increase in rates.
Rates increasing have been expected by many, however a combination of heightened cost of living, fuel prices and negative global economic conditions have added to mounting uneasiness in most households, mostly felt in the property market which is further weakening consumer confidence. It is however worth mentioning that falls in values remain relatively low compared to what is being broadcasted via the news channels.
The last couple of weeks, since the return of agents and the end of school holidays, we’ve seen an uplift in the number of listings albeit not all quality stock however this has provided more options to buyers. We have also seen an increase in buyer activity on the ground. Depending on the price point, location and condition of the property, buyers are still looking and actively exploring their options, however not engaging unless coerced to do so.
According to CoreLogic Economist Kaytlin Ezzy, Sydney and Melbourne continue to lead the pack in decline of property values, however the top end areas of Brisbane, Canberra and Hobart are now starting to be impacted. This trend started earlier in Melbourne and Sydney, as we saw the top end coming off back in January 22. Historically, properties at the top percentile are more volatile than more affordable properties, the first to fall during a declining market, however during an upturn the fastest to bounce back.
While property remains number one priority for most buyers, we are experiencing a period of stagnation as consumers weigh up multiple options, rationalise expenses and re-evaluate their financial positions.
State of Hibernation
The increase in listings have so far not been out of line with seasonal norms and there has been no evidence of distressed sales, panicked selling or a rise in distressed stock coming to the market. As we previously mentioned last month, good quality properties in good locations are still faring very well, especially family homes sub the two million dollar mark and villa units, particularly ones that form part of smaller developments.
CoreLogic data reports that at a national level, the rate at which new listings have been added to the market has been reducing since late March, when 46,603 houses and units were newly listed over the four-week period ending March 20th. The four-week count of new listings since that time however has trended lower at 37,476 new listings, that’s 19.6 per cent lower than the March 20th high and 1.4 per cent fewer properties relative to the same time a year ago. At a pre Covid level is 1.5 per cent higher.
CoreLogic – Percentage change in average number of new listings between winter and spring (based on pre-Covid average) level is 1.5 per cent higher.
The Melbourne property market is extremely seasonal when it comes to the flow of new listings and winter is no exception to this rule. While the level of uncertainly is mounting amongst buyers, vendors are also taking stock and holding off in the hope that by the time the Spring market comes around, the market will have somewhat stabilized. The flip side to this on the other hand is an increase in supply creates more choice and more choices equates to less competition.
Housing Occupancy and Costs
It’s taking longer to save up a deposit for the average first home buyer and break into the property market. The last few years have been especially challenging with a raft of competitive market conditions and as a result we are seeing a rise in older first home buyers.
Data from the Australian Bureau of Statistics (ABS) reveal some interesting facts around home ownership in Australia and who the modern days first home buyers are.
In 2019–20 there were approximately 1,115,000 recent home buyers:
- More than a third (38%) were first home buyers
- Almost two thirds (62%) had previously owned a home (changeover buyers)
Of the approximately 423,000 first home buyers:
- Most (92%) owned their home with a mortgage.
- More than half (61%) were in a household where the main reference person for the household was aged under 35 years.
- Over two thirds (69%) were either couple families with dependent children (41%) or couple only families (28%).
- Approximately one in six (17%) of the recent dwellings bought were new.
ABS 2019-20 Purchasers over previous three years
- Changeover buyers were less likely to purchase a flat or apartment than first home buyers (12% compared with 16%).
- Almost one in three first home buyers (32%) spent more than 25% of their gross household income on housing costs; compared to 23% for changeover buyers.
- The mean value of dwellings for first home buyers was $582,100 compared to $772,700 for recent changeover buyers.
The 2021 Census also found that in August last year, two-thirds of households (66.0%) owned their home, either outright (31.0%) or with a mortgage (35.0%). The number of households with a mortgage has almost doubled (96.8% increase) in the past 5 years.
According to the RBA, around 60 per cent of all borrowers currently have variable-rate loans, with around two-thirds of these being owner-occupiers. This data however dates back to the time of the 2021 Census.
Insights
As Australia’s housing downturn builds momentum, sharper falls in June dominate the landscape in Sydney and Melbourne with Sydney (-1.6% month and -2.8% quarter) and Melbourne (- 1.1% month and -1.8% quarter).
Every capital city is now well past their peak rate of growth with Brisbane which has led the pace in growth and migration since the onset of the pandemic in March 2020, recording a growth rate of just 0.1 per cent in June. Adelaide remains the only capital city with a recorded rate of growth above 1.0 per cent.
The unit or villa markets as we refer them to are holding their value a little better than houses across the largest capitals. Sydney recorded a -3.0% drop in houses values through the June quarter compared with a -2.1% fall in unit values. Melbourne showed a smaller quarterly decline in units relative to houses at -0.5% and -2.4% respectively.
This stronger performance across the unit sector comes after house values consistently outperformed units throughout periods of upswing with CoreLogic Research Director, Tim Lawless reporting that since the onset of the pandemic in March 2020, capital city unit values have risen 9.8% compared to 24.7% for houses. Units remain the more affordable option for first home buyers and downsizers, and we are seeing an increase in activity in this sector.
CoreLogic’s Home Value Index (HVI) showed Sydney (-1.6%) and Melbourne (-1.1%) dwelling values continued to record the most significant month-on-month falls.
Auctions
Auctions remain a challenging environment, where the prospect of a failed auction is now commonplace. Certainty that buyers will bid on auction day is waning and as result we are seeing an increase in properties selling prior to the auction date. On the flip side, we are seeing also seeing an increase in properties sitting online for an extended period. Tougher selling conditions are evident in weekly auction results, where the combined capitals clearance rate has held below 60% since the last week of May.
Melbourne is set to host the most auctions this week, with 806 homes scheduled to go under the hammer. Melbourne is expecting its busiest week of July. Clearance rate continued to lower for the fourth consecutive week to 52.0%. Melbourne’s withdrawal rate of 11.0 per cent held steady around the 11-12 per cent mark while the portion of properties passed in rose for the fourth consecutive week to 37.0 per cent.
Source: CoreLogic Acution Preview
There were 3,177 reported auctions in June 2022 with 2,150 of these sold representing a clearance rate of 67.7 per cent.
No suburbs in Melbourne reported a clearance rate of 100 per cent, only the regional town of Warrnambool with 11 properties sold. Fitzroy North, Rowville and Ferntree Gully led the pace of a clearance rate of above 90 per cent. Reservoir reported the highest number of auctions at 62 with a recorded clearance rate of just 64.5 per cent.
Property Management Update
With the close of the 2022 financial year, it’s a good time to start thinking about any repairs or updates that you may want to do prior to the end of the 2023 End of Financial year. If there is something that you have been thinking about doing at your investment property, contact Liz or Rachel who will be able to assist you with these.
Did you know that 1 in 3 Property Managers has left the industry? Here’s why….
30 per cent of residential property managers have left their jobs over the past year according to real estate industry leaders and who warn there is no short-term fix to the problem. Issues arising from COVID-19 lockdowns including higher levels of stress and mental health challenges have impacted renters, rental providers and a significant number of property managers alike.
Previous President of the Real Estate Institute of Victoria, Leah Calnan estimates that one in three of the state’s property managers have left the industry since COVID-19 lockdowns and the rental industry was hard hit in March 2020. Stress levels caused by financial uncertainty for both renters and rental providers have left property managers in the middle of many hostile situations.
“It’s been a very stressful period and people have left the industry for their mental health and well-being after having to continually deal with people being rude and unreasonable, both landlords and tenants,” Ms Calnan said.
Buyers Advocate are very proud of our team of dedicated property managers. It hasn’t been an easy time for anyone, but the real estate industry (amongst many others) has been impacted greatly. Our team have continually managed both rental provider and renter expectations, always seeking the best outcome for all parties involved and always doing this with a smile. Rachel and Liz agree that relationships, trust and respect are key factors in all dealings. Remember, we are all doing it tough so being kind to each other is a great start.
If you are unhappy with the level of service you are receiving from your current Property Manager, have a chat to Rachel or Liz. It may be time for a change. We pride ourselves on creating an unsurpassed property management experience for all clients.
If we can assist you in managing your investment or to arrange an assessment of your property contact us (03) 9818 4499.
Property Purchases
The changing market conditions continue as we continue to deliver great results for our clients. Here are a few below:
Home Buyer Purchase – Windsor
Our first home buyer client engaged us to secure the keys to this large 2 bedroom plus study, 2 bathroom secure apartment in the sought after Windsor location. Given the location, near perfect floorplan and amenities provided within this development a competitive auction took place and we won the keys to this property under our client’s budget.
Home Buyer Purchase – Richmond
This perfectly positioned and laid out property was secured prior to auction for our home buyers. With the benefit of having exceptionally strong agent relations we were able to extract important information surrounding the circumstance of this particular sale and used this to our advantage, securing this property for $50k less than the bottom of the quoted range.
Home Buyer Purchase – Collingwood
Our repeat clients were after a home in an inner Melbourne suburb with a limited budget of under $1m. We secured this large three bedroom with multiple living rooms and study through strong agent relationships and submitting an offer working with the process and providing the vendor with time comfort as opposed to extra money to secure the deal.
Tip Of The Month: Know Your Values
It is important to give consideration to how the property you are looking to buy compares to other properties recently sold, in the street and suburb.
Comparable sales provide a more realistic, though general, indication of where the property is positioned in market price. This information contributes to a more informed, and therefore more confident negotiating position, against the quoted price from agent and asking price of the vendor.
An agent can provide a list of comparable sales and this should include all the most recent properties sold in the street, in the selected period time. When looking at comparable sales it is important to consider the many factors that can influence the price paid and future demand of any property. For example:
- Land size
- Orientation of the house
- Architectural style
- Age of the structures
- Construction type (building material)
- Quality of fixtures and fittings
- Condition, standard of maintenance and structural defects
- Improvements
- Functionality of the floor plan
- Quality and style of finish, garden and surrounds
- Surrounding houses
So do your own homework and make sure you understand the true value of the property before you make an offer!
