In retrospect, as the 2020 year drew to a close, November and December were two of the busiest months I have ever experienced!  In conversations had with others involved in selling real estate, they too have had record months.  Last year, activity was strong right up to Christmas day and I found myself still trying to negotiate buying a property for a client on Christmas eve.

Record prices were achieved in many suburbs and regional towns.  In some cases, several hundred thousand dollars above reserve.

Many properties did not make it to auction, selling before, off market or privately within days of being listed.  That was certainly my experience.  The majority of transactions I have been involved in have been conducted privately without fanfare.  So, what has caused this resurgence in demand?

• Record Low Interest Rates
  Fixed interest loans are now under 2% per annum and variable rates are as low as 2.5% per annum.  Interest rates are lowest in living memory and expected to remain low for at least the next three years.  This will cause a tail wind for property.
• Lockdown
  Lockdown has caused pent up demand.  Lockdown simply meant movement was restricted and properties could not be transacted.  It didn’t mean that there was anything fundamentally wrong with property.  Because of a shortened property selling period in Spring, there remains a lot of demand that will now flow into February 2021 when market reopens.
• Restrictions on Other Spending
  Restrictions on spending on travel, restaurants etc means savings are higher and this is flowing into bricks and mortar.
• Vaccine
  Confidence will improve into 2021 as COVID vaccine is rolled out which will help borders reopen and housing demand.
• Government Support
  New stamp duty concessions for new and established property.  New government grants will only help to support the real estate industry.
• Restrictions and Policy Changes
  The easing of restrictions and policy changes outlined in the Hayne Royal Commission report are making it easier to obtain finance.  The supply of money for lending to borrowers is a key factor in stimulating housing and construction demand.
• Expatriate Australians
  A reported 4000 expatriates are returning to Australia each week.  Demand from this higher income group is offsetting the effect of international migration caused by border changes.
• Demand for Housing
  Demand for housing is exceeding the supply.  Put simply, we are not building enough detached family homes to satisfy current demand.
•  Cheaper to Buy than Rent
  With interest rates currently around 2%, it is now cheaper to buy than what it is to rent.  Rental yields in Melbourne for housing generally lies in the 3%-3.5%.
• Uncertainty
  Traditionally, during uncertain conditions, store of value assets like bricks and mortar, and gold rise in demand.  An asset that can provide shelter, that you can see and touch, provides great security in troubled times.

HOME VALUE INDEX

MELBOURNE

HOUSES

Median house prices monthly increase                     1.2%

Median house prices quarterly increase                    1.5%

Median house price                                                    $799,980

UNITS

Median unit prices monthly increase                         0.6%

Median unit prices quarterly increase                       1.4%

Median unit price                                                       $576,905

Source : Corelogic

GREVILLE’S OBSERVATIONS

• Family homes close to Melbourne transport hubs and shopping villages are in strong demand and will see double digit capital growth in 2021. Some suburbs will see 15%-20% capital growth.
• Affordability and lifestyle will continue to drive demand for regional and lifestyle property. Technology and uncertain return to work for many in our labour markets means many employees can now work from anywhere. A proportion of workers may never return to a centralised office.
• Townhouses, villa units and older style flats under $1,000,000 will surge in demand. Changes to Government stamp duty scales and other Government incentives, together with affordability, will have a positive effect on these property types.
• Performance of new apartments within high density residential developments will remain subdued. Vacancy rates are as high as 30% in some buildings in the Docklands, CBD and Southbank areas. Consequently, achievable rent has been considerably discounted by as much as 50% in some cases. This market is heavily reliant on overseas students and international migration. Growth will remain subdued until international borders reopen.
• The Victorian housing market has shifted sharply from a buyer’s market to a seller’s market.
• Greenfield fringe housing development locations in Melbourne’s outer west, north and south east. Check for oversupply. Capital growth may be capped for the next 18 months as new stock over supplies market.

Are You Thinking Of Selling In 2021?
Contact Greville Pabst Vendors Advocate For Help!