The end of September marks another month of stagnation within the property market. The death of the longest reigning monarch, footy grand final, school holidays and a winter which won’t go away have certainly made the last few weeks challenging for most.
The property market over the last couple of weeks has stalled for the most part with limited new listings and what is available is often for compromised or overpriced properties staying online for an extended period of time. To be fair it’s has been like watching time stand still for many in the industry.
While we sit back watch and listen to the endless media coverage of how the property market is falling at the fastest rate in modern history and values plummeting to record lows, from where we sit it’s a different picture. Whilst previously reported, things are slow on the ground, however A grade properties are still being transacted and the majority of these still obtaining above reserve price tags with multiple offers and bidders.
We’ve also seen some pretty extraordinary results of late which begs the questions, are things as bad as what they are made out to be? Sure, interest rates are on the rise, global uncertainty and not to forget the cost of living concerns, but it seems that for the most part, people are still spending.
The most recent being the recent sale of a 3 bedroom, 2 bath, 2 car home in Malvern East which had a quoted range of $1,500,000 – $1,550,000 which sold after just 14 days on market for $3,000,000 at an auction bought forward due to the sheer competition. It’s worth noting here that over 100 people inspected this property, 40 registered bidders with 5 actively engaging in competitive bidding. The downsizer market remains extremely strong for properties that require little to no works.
Another being a 4 bedroom, 4 bath, 2 car home in Glen Iris with a price tag of $3,500,000 – $3,850,000 which passed in at auction and later sold for $4,750,000. A prime example of knowing property values and how to successfully negotiate with an agent after a pass in could have saved this particular buyer a significant amount of money.
There is a premium being paid for properties whereby no works or renovations are required, and if located in sought after areas, are selling extremely well as buyers factor in improvement costs and time. A buyer with a renovation budget of say $600,000 will now allocate these funds to a finished home, in turn driving up the market for good quality family homes.
So, our advice would be not to believe everything you read. Do your own research and understand how the multiple submarkets of the Melbourne market are playing out before taking any action.
Underquoting
A timely segway into this next segment as underquoting is again at the forefront of the Victorian governments agenda with plans to dedicate a task force to investigate deceptive property quotes across the state.
While this is not new and we’ve heard of agencies being slapped with a fines and embarrassing public notices of their breach, time will tell if this latest initiative will hold any substance as From 1 July 2021 to 31 July 2022 the CAV recorded 1,466 underquoting inquiries and complaints. During the same period, only 48 infringements and 171 official warnings were laid, only a small percentage of what is reported.
To date fines issued have ranged from $9,000 to $900,000 depending on the number of cases investigated per agency, however as limited time and resources have been allocated to this ongoing issue, many more agencies have flown under the radar.
As buyers advocates, we would like to see more meaningful regulatory changes occur, more transparency around the vendors price expectations or reserve enforceable guidelines. This should be achieved without jeopardising the vendors position as at the end of the day, the property being sold belongs to the rightful owner who ultimately has the right to dictate what he/she wants for the property.
Homebuyer Funds
Finally details of the terms and conditions surrounding the governments Homebuyer Scheme are available and it comes as no surprise that although it will be easier for the 3000 eligible recipients to afford a property, the rules and conditions imposed surrounding these handouts are cause for concern.
Concerns are many and varied, however the most significant of these are listed below:
- Property purchases are subject to finance only hence significantly limiting options to buyers – The Valuer-General oversees valuations for Victorian Government property transactions and rating valuations and will be used to determine your property’s value, not the market.
- Annual reviews are to be conducted with supporting information provided ensure ongoing eligibility by way of tax returns, payslips, utility bills and homeloan statements – If your income exceeds the gross annual income threshold for two consecutive years, you will be required to repay the Government’s financial contribution in part or in full
- Participants are required to hold the property as your principal place of residence for at least two years, unless exceptional circumstances occur – Unless approved, the property cannot be vacant for more than three months and must remain a principal place of residence
- Modifications or improvements to the property exceeding $10,000 will require prior approval – The impact of the proposed modifications on the value of the property will be determined by the Office of the Valuer-General Victoria
- Participants must seek approval to refinance or sell the property and also to make voluntary payments that result in them exiting the Victorian Homebuyer Fund within the first two years – Two years is a significant amount of time in the property market, especially for a buyer that has been sold the idea of making the largest purchase of a lifetime for a 5 per cent deposit tied to government bureaucracy
Being able to secure a first home is no mean feat, however doing so with a deposit of $30,000 for a property purchase of $600,000 tied to a 25 per cent shareholder holding all the cards is fraught with danger, particularly for buyers buying properties which could very easily go into negative equity as a result of market conditions or simply buying the wrong asset.
A 10 per cent deposit with options to freely sell, renovate, lease or utilise the property to best fit the owners lifestyle is a far better option as well as being able to purchase the right property by auction as well as private sale helps mitigate any risk of going into negative equity.
Insights
The media headlines are a cause for concern for many so let’s break this down.
Currently every state is in a downturn phase with Darwin the exception and looking at a national level, property values have fallen by -3.8 per cent over the last quarter and down -1.6 per cent in August 2022.
While it’s obvious we have seen the peak of the property market and in correction mode, we are still a way off from witnessing a 20 per cent decline in property values, in actual fact the majority of failed auctions are those for compromised properties, properties which at the best of times take longer to transact in a normalized market or those labelled as renovator delights.
Despite the downturn, housing values remain higher than the pre-COVID levels with the exception of Melbourne, which can be directly related back to our longest lockdown periods and mass exodus of people to either the regions or interstate.
Corelogic data indicating housing values across most of Australia have moved through their peak, following a significant rise in dwelling values since March 2020.
CoreLogic’s research director, Tim Lawless is noted saying that a 15% peak to trough decline would roughly take CoreLogic’s combined capitals index back to March 2021 levels. As interest rate continue to rise however, uncertainty will continue to mount, having a direct effect on buyer sentiment.
Auctions
Football, public and school holidays saw auction volumes plummet last week in Melbourne by -86.9 per cent although of those auctioned a clearance rate of 66.0 per cent from only 132 auctions were held, the quietest auction week since mid-January 2022.
Source: CoreLogic Auction Preview
There were 2,419 reported auctions in August 2022 with 1,696 of these sold representing a clearance rate of 70.1 per cent for the month combined.
South Morang, Avondale Heights and Caroline Springs were the only Melbourne metro suburb with a clearance rate of 100%. Reservoir reported the highest number of auctions at 51 followed by Glen Waverley (42).
Property Management Update
Important things to note for Rental Providers
Legislation Changes / Renters Requesting To Keep Pets
Since the changes in legislation, renters who wish to keep a pet at their property can ask their rental provider for permission to do so. The rental provider must have a good reason to refuse the renters request. See more details here at CAV or speak with one of our staff who can advise you in detail on this change.
https://www.consumer.vic.gov.au/housing/renting/repairs-alterations-safety-and-pets/pets
As a result of this change it is important for all rental providers to ensure that you hold adequate landlord insurance to safeguard against any potential damage or loss as a result of this change. Does your policy cover pets?
Landlord Insurance
Landlord insurance – if you do not have landlord insurance, we highly recommend that you speak to one of the following providers who specialise in this field. Ensuring that your investment property has the correct policy in place could save you in the future.
- EBM Rent Cover 1800 661 662
- Terri Scheer 1800 804 016
- Property Insurance Plus (PIP) 1300 307 072
Rental Market Update
Although the rest of the country is reporting a shortage of rental properties and rapid increase in rents, Melbourne continues to lag behind other states as we are yet to catchup with migration loss from the onset of Covid. Although we are seeing an increase in demand as migration again resumes, vacancy rates in the inner and middle rings of Melbourne remain higher than the outer regions of Melbourne. This reflects the demand for larger homes as people continue to work from home. We expect this to change in the near future.
Vacancy rates fell to 3.2 per cent in August 2022 and the median rent in metropolitan Melbourne for both houses and units remained at $500 and $430 per week respectively for four consecutive months.
Our Property Management Team prides ourselves on consistently improving so that we may effectively manage your property and bring you the best results. 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 would like to speak with one of our dedicated Property Managers, please feel free to contact Rachel or Liz on 03 9818 4499 for a confidential chat.
Property Purchases
The month of September has been slow, however we have delivered some outstanding results for our clients. An example of which is below;
Home Buyer Purchase – Mont Albert North
A referred client came to us wanting help with finding the right first home which would fit in with her criteria, budget and preferred location. While townhouses are a dime a dozen in certain pockets of Mont Albert, this oversized and perfectly maintained 4 bedroom, 3 bathroom, 2 car garage sitting on an allotment of land of over 230m2 shared amongst only 2 other townhouses will no doubt perform very well for our client for the years to come.
This was purchased under budget with the price negotiated under private treaty.
Tip Of The Month
Take care with “off the plan developments”
Be cautious of anyone advocating to be “on your side” and who then tries to influence you to buy a particular type of property, especially “off the plan” or brand new properties.
If it suits your needs and you have been able to perform the necessary level of due diligence, we have no issues in the purchase of these types of properties.
However, many developers offer large commissions to professionals if they can introduce a buyer to purchase their property. Some commissions paid, or otherwise known as ‘kick backs’, can run into the tens of thousands of dollars. This also applies to professionals who do not get paid a fee from their client.
So take care, particularly in this challenging market. Ensure that you are receiving the right advice for your circumstances and you are buying the property for the right reasons. If you need any advice, come to see us at Buyer’s Advocate.
