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This should be the business end of the spring property market however we wouldn’t judge anyone for thinking we have slipped back into a winter market.
The current market can easily be confusing for many and even harder to navigate than in a heated market as there is a clear lack of consistency across markets. If you listen to the narrative, all property sales should be offering discounts or the opportunity to purchase a bargain however, this is not our experience particularly.
Headlines highlighting significant declines in property values are achieving their purpose, imposing mounting uncertainty and questioning the best time to buy; has the market bottomed out? will next year present better buying opportunities? how much will interest rates rise to?
At a national level, property prices are now in negative growth territory and while it is easier to make assumptions that the market (as a whole) has been affected, we remind our buyers that there are markets within markets. Depending on varying criteria such as property style, condition, position, price point and the suburb the property is located, all have an impact on value, supply and demand and all determine the level of competition and how aggressive or relaxed you need to be if you are looking to secure a property.
Vendors are also susceptible to the challenges of this multi speed market. A failed campaign versus a successful sale depends on a buyers wants and needs for their property at that particular moment in time. Will they want or need it enough to buck the trend and commit to a purchase or sit by the sidelines and spectate alongside many want to be buyers?
So, is it best to sell now or wait until the market gains more confidence? As 2022 draws to a fast close, vendors thinking of selling this side of Christmas would want to be getting their property online within the next couple of weeks in order maximise exposure and buyer appetite before the Christmas wind down and buyers lose interest.
Although the market over the last few months have presented many good buying opportunities for many buyers, the uncertainty around interest rates, inflation and other economic influences have played their part in dampening what could have been a great time to enter the market for many, particularly first home buyers. 2023 will no doubt continue to be a challenging year and most likely will see a continued period of uncertainty.
Looming House Crisis
Off the back of a bumper and unprecedented period of property growth, a storm has been brewing in the background for some time, which has now become a major focal point as rents continue to rise across many capital cities.
The sale of many investment properties by vendors wanting to cash out, the introduction of many rental reforms causing many investors to sell, the mass migration into regional areas and across state borders resulting in a shortage of stock available to locals, interest rate rises and inflationary issues compounding have all played a part.
The federal budget has taken aim at alleviating cost of living pressures and as part of the governments push to combat housing affordability, it has announced multiple measures to be implemented over the course of the next five years to provide affordable and social housing options.
The most significant being the establishment of a new national Housing Accord. This is basically an agreement between the governments, investors and construction sector working in collaboration to build one million new, well-located homes by 2030.
Under the Accord, state and territory governments will undertake expedited zoning, planning and land release in well located areas including looking for immediate opportunities to free up well-located state land for development.
As with all new policies, the devil will be in the detail and while this initiative will to a certain degree aid the housing crisis, it does not kick in until 2024, what happens in the meantime? Also, with an already struggling residential construction industry currently facing capacity constraint, it will be an interesting development to keep an eye on in the years to come.
ABS data has the number of constructed homes at 974,732 in the five years to June 2022, and an average of 1,010,723 have been completed on a five-year basis since 2017. Data shows the decade to 2015 saw average five-year completions at a total of 772,000. However, as interest rates rise, house values fall and supply constraints persist, the completion of one million new homes may not be a guarantee and seems somewhat ambitious.
The devil will be in the details, and it will be interesting to see how the Housing Accord incentives establishes and enforces these incentives.
Other Existing Incentives
In addition to the Housing Accord, existing policies to boost affordable housing and overall supply have been introduced. These include:
- A ‘Help to Buy’ scheme, allowing up to 40,000 eligible Australians to own a home through the government taking an equity stake in the property, effectively co-purchasing the property. Over time, the buyer could buy out the government, or payout the governments share once the property is sold
- The Regional First Home Buyer Guarantee, supporting 10,000 low-deposit home loans for Australians living in the regions for at least 12 months and allows the purchaser as little as a 5% deposit without paying LMI (Lenders Mortgage Insurance)
- A $10 billion housing Australia Future Fund, to boost social and community housing by building 30,000 affordable homes for the vulnerable and frontline workers
- Downsizer program whereas the minimum eligibility age has reduced from 60 to 55 years allowing a one-off post tax contribution to superannuation accounts of up to $300,000 per person.
- The Defence Home Ownership Assistance Scheme, with $46.2 million added to the scheme to help defence force members buy their own home. The scheme will pay a monthly subsidy on the members home loan interest and will be administered by the Department of Veterans Affairs for Defence
Australia’s Capital Gains
With the recent growth phase now well behind us, attention now draws to the longevity and extent of the downturn. As reported in previous newsletters, the large-scale reports of double-digit price falls are skewed and very much down to interpretation.
CoreLogic data indicates dwelling values since the March 2020 pandemic, peaking in March 2022 and the downward trajectory to date that, at a national level, the peak of the market was at nearly 29 per cent with a recent recording of a 4.8 per cent downturn to the end of September 2022.
Melbourne figures indicate that a downturn of another 4.3 per cent would take dwelling values back to pre-COVID levels, however this heightened vulnerability over other states is because Melbourne didn’t see the rate of growth other states were subjected to.
Regional Tasmania here has the largest buffer, with housing values needing to fall by 31.0 per cent before reaching March 2020 levels.
This is also not a case of values falling faster than other cities as Melbourne’s quarterly rate of decline, at -3.7% through the September quarter, was lower compared with Sydney (-6.7%), Brisbane (-4.3%), Hobart (-4.5%) and Canberra (-4.4%).
A more subdued spring season has resulted in a softer market overall. The widespread downturn has resulted in the combined value of residential real estate in Australia to fall to $9.6 trillion dollars at the end of September 2022, down from $9.7 billion in the previous month.
Dwelling values across Australia however remain higher than they were this time last year by a margin at 1.7 per cent. There is a loss of momentum in the pace at which values are declining across most of the capital cities.
Falls in value in Adelaide and Perth accelerated this month, however both cities continue to record only a mild reduction in values relative to the other capitals (down -0.2% and -0.4% respectively in September). Sydney’s monthly rate of decline eased from -2.3% in August to -1.8% in September, Melbourne tapered from -1.2% to -1.1% and Brisbane falls went from -1.8% to -1.7%. Darwin remains the only capital city where housing values haven’t started to trend lower
We continue to see segments of the market, primarily A grade homes faring well. The last few weeks, more buyers have been turning up for inspections and the level of enquiries have increase, however the overall mood is still quite subdued. There is still an opportunity for engaged buyers to buy well before Christmas as more properties are coming online but will need some filtering through to locate the best.
Demand for good quality and renovated units are on the increase and depending on varying factors such as density level, orientation, suburb and position, have remained somewhat resilient to market downturn as these types of dwellings offer a balance of land, accommodation and living options for those priced out of the housing market or those wanting to downsize.
Key factors such as affordability and serviceability now place units back into the spotlight as we see house values decline at a faster rate than unit values and according to CoreLogic Kaytlin Ezzy “As we move further into the downwards phase of the cycle, and the annual trend approaches negative territory, it’s likely the annual performance gap will begin to widen in the other direction, with unit values being more resilient to affordability constraints and rising interest rates.”
Throughout the pandemic, we saw heightened demand for larger homes with more space resulting in national house values rising to 32.5 per cent in September 2020 to April 2022 with unit values rising at a milder rate of 16.1 per cent over the same period. However, since April house values are reversing at a faster rate than that of units, houses falling by 5.3 per cent and units a more moderate 3.0 per cent.
Weakened consumer confidence continues to cause lower auction volumes across Melbourne as there are more pass ins, properties being pulled from the sale at the last minute either due to lack of interest or vendors expectations not being met.
Properties which are being passed for the most part are being sold shortly after the auction and is not necessarily due to a lack of interest or the vendor’s reserve not being met, buyers are opting for more favourable conditions in which they can secure a property with additional securing such as a subject to finance clause, which is not possible under auction conditions.
Many good quality properties pulled from auction or passed in at auction are selling post auction and in many instances within the quoted ranges or above. This depends on how well the buyer is able to negotiate with the agent!
There were 2,454 reported auctions in September 2022 with 1,752 of these sold representing a clearance rate of 71.4 per cent for the month combined.
The suburbs of Bentleigh, Burwood, Albert Park and Ashburton a clearance rate of 100%. Glen Waverley reported the highest number of auctions at 40 followed by Craigieburn (38).
Property Management Update
It is hard to believe that we are in the last quarter of the year. Christmas will be upon us before we know it!
Whilst our renters were very accommodating during Covid with their ‘self-inspections’ our team are working extra hard to ensure that all properties due for their routine inspection are being attended to. Reports along with photos are being sent to our rental providers along with any maintenance items and or recommendations.
We are recording greater numbers of people attending our open homes which in turn means that we are starting to receive multiple applications for each property. This gives rental providers choice when selecting the best renter for their property. We are also starting to see quicker turnaround time when leasing properties. We are starting to see less days on market much like pre Covid times.
With the copious amounts of rain we are having, it is a good time to remind rental providers that gutters and downpipes should be cleaned out at least once per year. If you would like for the gutters on your rental property to be cleaned, please contact our Property Management team and they will arrange this for you.
Victoria’s vacancy rate fell to 2.9 per cent in September 2022.
Across metropolitan Melbourne the vacancy rate went down to 3.2 per cent. Inner Melbourne saw a decrease to 3.3 per cent while middle Melbourne went up to 5.6 per cent and outer Melbourne’s vacancy rate stayed at 1.6 per cent (the same per cent for four consecutive months).
Median Rent – Melbourne Metro
The median price for a 2 bedroom house is about $500 per week while a 2 bedroom unit sits at $430 per week.
Our Property Management Team prides ourselves on consistently finding areas to develop and grow 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.
A recent example of a great off market acquisition for one of our clients is detailed below.
Investment Purchase – Carnegie
Having previously purchased the front unit for our clients, we knew of its potential and the future value and benefits of holding both properties. Through an thorough and lengthy negotiation process, we successfully managed to secure the back unit for a very reasonable price, under budget and what we consider a true ‘off market’.
Tip Of The Month:
A Legally Binding Contract of Sale
A legally binding contract is achieved when the seller accepts your offer and countersigns the contract. This contract sets out the terms of the sale and must include:
- Names of the buyer
- Names of the seller
- Names of the Real Estate Agent
- The Title details
- Total purchase price
- Deposit amount
- Balance of purchase price payment
- Date of settlement
- Singed Vendor Statement
A cooling off period applies to residential property for three clear business days, from the date and time you sign the contract – Note this does not apply to the date and time of the Vendor signing the document.
The exception to this is if you buy the property:
- within three business days of a publicly advertised Auction
- on the day of the Auction
- or three business days after the Auction