The property market continues to bubble along with supply continuing to be the biggest obstacle facing would be buyers. This will pick up in the next couple of months as we head into Spring, however the imbalance with demand could not be more obvious, particularly for good quality property. At auction 4-6 bidders is starting to become the norm. This is resulting in some pretty strong results and should be a reminder to people not to take too much notice of market commentary.
Put simply if supply remains low and demand increases, particularly with the increase in migration there is not enough property on the market to satisfy buyers.
Like any property cycle however, not all areas and properties are performing the same. There is still an aversion to buying properties that require renovation. This relates to the negativity surrounding the construction industry and costs, although the latter is starting to stabilize.
We are also starting to see supply increase in some of the outer areas of Melbourne outside the 20 km radius of the CBD. This will put pressure on prices in these areas over the coming months.
Inner Melbourne however is lacking any real impetus as people are hanging on and preferring not to participate in the market at this time. Also those that are looking to buy are doing so before they sell in many instances, further exacerbating the problem.
So we are looking toward Spring to see what this brings both in supply and demand. This will point to the short term direction in the market.
In this months newsletter we provide our normal insights, property management update, a couple of purchase examples and our tip of the month on the value of buying in a good school zone.
Source: Corelogic August 2023
CoreLogic Research Director, Tim Lawless, noted the most substantial reduction in growth has occurred in Sydney. “After leading the upswing, the monthly pace of growth in Sydney housing values has halved from a recent high of 1.8% in May to 0.9% in July. Sydney has also seen a significant rise in the number of fresh listings added to the market, 9.9% higher than the same time last year and 18.0% above the previous five-year average. An increased flow of new listings provides more choice and may be working to reduce some of the urgency felt among prospective buyers,” he said.
Each month the CoreLogic Research team puts together a Housing Chart Pack, with all the latest stats, facts and figures on the residential property market, such as the combined value of residential real estate, sales volumes, and the trend in new listings.
Here are this month’s highlights*:
- CoreLogic estimates put the combined value of residential real estate at $9.9 trillion at the end of July.
- National home values rose 2.9% in the three months to July, the highest quarterly movement since January. However, monthly growth slowed to 0.7% from 1.1% in June.
- The combined capital cities dwelling market value rose 0.8% in July, easing from a 1.2% lift in June. Monthly increases across the combined capitals surpassed a 0.2% lift in the combined regional market over the month.
- CoreLogic estimates there were 39,064 sales in July nationally, compared to a historic five-year average of 40,120 for the month of July. The six-month moving trend suggests sales volumes are stabilising, despite being down from recent highs in 2021.
- The amount of time it takes to sell property trended slightly higher through the three months to July, with the median days on market edging higher to 34 days. This was up from a recent low of 30 days in the three months to April.
- At the median level, vendors are now offering less of a discount on their property. The median vendor discount nationally was -3.9% in the three months to July, up from a recent low of -4.4% at the end of last year.
- In the four weeks to July 30, new listings totaled 33,616 nationally. New listings trended slightly higher through July, which is unusual for this time of year. However, new listings remain slightly lower than the historic five-year average.
- At the national level, there were 132,058 listings observed over the four weeks to 30 July, 2023. Total listings are trending lower than the previous five-year average due to strong absorption from sales.
- The combined capital cities clearance eased slightly through the month, averaging 66.5% in the four weeks ending 30 July 2023. This is down from a recent high in the average final clearance rate, of 71.3% in the four weeks to 4 June. While the capital city clearance rate is moving lower, it is still trending above the decade average of 65.1%.
- Australian rent values increased a further 0.6% in July, taking the national annual increase to 9.4%. Annual growth in rent values remains elevated on the previous decade average, but has shown signs of easing. Growth in rents declined from a 10.2% high over the 2022 calendar year.
- Against the monthly increase in rent values of 0.6% nationally, purchase values rose 0.7%. This created a marginal reduction in the national gross rent yield to 3.83%, from 3.84% in the previous month.
- ABS dwelling approvals dropped -7.7% in June, comprised of a -0.8% fall across detached houses and a -16.2% fall in unit approvals. For the past 12 months, monthly dwelling approvals have averaged 14,649 per month, below a decade monthly average of 17,344.
Property Management Update
Australian rent values increased a further 0.6% in July, taking the national annual increase to 9.4%. Annual growth in rent values remains elevated on the previous decade average, but has shown signs of easing. Growth in rents declined from a 10.2% high over the 2022 calendar year.
Against the monthly increase in rent values of 0.6% nationally, purchase values rose 0.7%. This created a marginal reduction in the national gross rent yield to 3.83%, from 3.84% in the previous month. As the housing market moves through an upswing and the pace of rent increases decline, yields are likely to compress in the short term.
A word from our property managers
After all this cold weather, it will be nice to say farewell to the single digit temperatures and welcome Spring.
Amidst this rental crisis, we are finding that many of our renters want to stay put in the property they are in with many opting to sign further fixed term agreements.
Properties that we advertise are leasing out rather quickly with many applications being submitted, giving our owners choice. This unfortunately seeing so many applications unsuccessful and having to continue on with their search.
Over the past year, rental vacancies across capital cities have declined meaning that in all there are 21% fewer properties to rent than 12 months ago.
Melbourne renters are offering up to $45 per week more than the advertised price on rental properties, not because the property is advertised at the wrong price, because they themselves are seeing the volume of potential renters attending any one open home.
Properties are likely to be rented out quicker and potentially at an amount more than advertised as renters believe this is a way to secure their next home. All applications are processed and presented to owners as it’s not always the applicant that offers more that is the right renter for your home.
We pride ourselves on our honest open communication and the strong relationships we build with our rental providers and renters alike.
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. If you would like a confidential chat, please contact us (03) 9818 4499.
Although supply has been very low, we have continued to deliver great results for our clients. Here are a few below:
1st Home Buyer- Richmond
Upon inspection, this apartment had all the hallmarks of quality, but being built so recently, meant we had to carry out a thorough check for combustible-cladding.
All checked and cleared, we put our offer forward, against another 4 parties. Sometimes longevity in the Melbourne Real Estate market with good selling agent relationships can mean the difference between whether you buy the property or not. In this case, we had the relationship with the selling agent and “reading between the lines” knew the price and terms we needed to beat. Property secured and another happy client.
Holiday home- Dromana
This was a great holiday home that we bought for a client. They had been looking for some time so when a property presented itself that was beachside of the freeway they were very keen to proceed. As demand had declined in the area there was an opportunity to buy this property well at auction although the agents advised this could be bought prior. We took our chances and good thing we did as the property passed into us at auction. After a lengthy negotiation we were able to secure the property well below what it would have cost had we pursued an offer prior. Interestingly the agent used their recent rates notices to justify a higher figure, however we were able to ignore this and use our own research and information to agree on a number $120,000 less than the rates valuation. A good result!
Home buyer- apartment Port Melbourne
We bought a great apartment for a home buyer looking to live in Port Melbourne. This apartment block had great facilities and the apartment itself was well appointed as the owners designed it themselves off the plan. However as is often the case the people that buy off the plan often pay a developers premium and pay way over the odds for what the property is really worth. This was no different here as the vendors paid $1,295,000 to secure this property in 2019 and we paid $1,037,500. So make certain if you are looking to buy off the plan that you do your research on the price people are paying for established properties in the area as this is likely to reflect your resale value or even better buy something that you can see and touch, not based on a glossy brochure. A great outcome for our client.
Tip Of The Month:
Always allow for maintenance costs
Planning for maintenance costs when buying a property is important because properties inevitably require upkeep over time. Regular maintenance helps preserve the property’s value and prevents small issues from turning into larger, more expensive problems. By budgeting for maintenance costs, you can avoid financial strain and ensure that your property remains in good condition, which is essential for its long-term appreciation and your overall investment.
A typical amount of money that needs to be set aside could be anything from 1-2% of the properties value. So for a $1,000,000 home that could be $1,000 – $2,000 per annum. Those that don’t spend money on upkeep can see these costs blow out when there are major problems to deal with.
It can also be a good idea to conduct a building inspection before you buy so you have a good idea as to the maintenance requirements and can start budgeting for these from day 1 of ownership.