We are now nearing the end of October and at last Victoria has come out of Stage 4 COVID lockdown. There is a buzz in Melbourne town following our Premier’s announcement of last Monday as business starts to reopen.
With Victoria representing almost 25% of the national GDP, this news will be welcome federally and interstate. We all hope that these next steps are the beginning of the long road to recovery. Anecdotally, I can say that over the last 3 weeks, property valuation instructions in our property valuation business, WBP Group, have surged 20%-30%.
The large increase in transaction volumes and rising listings is helping this but aside from an increase in refinance valuations, contract/ purchase valuations have increased. Commercial valuations, strangely not allowed, are now back open and sadly there has been a surge in Family Law/Matrimonial valuation requests.
In the real estate business, acting as Buyer’s Agents (also known as Buyer’s Advocates), activity too has surged. It appears 8 months of pent up demand has been unleashed. Whilst transactions are rising, many vendors are holding back unaware it would seem of the current market strength. Consequently, good property is selling well, usually at the top end of the range or above.
Secondary property is sitting longer but overall confidence is starting to build. It is important that vendors see this market activity and initial strength as it is these conditions that will bring other vendors out from hibernation to list. Many properties are being sold privately and before auction under the guise of Expressions of Interest campaigns.
Those proceeding to auction are vendors with more than one buyer buoyed by offers made prior giving the agent and vendor alike the confidence to run a full campaign. Many properties are sold off market and have not been publicly advertised online. As we are returning to auction, some clear trends are starting to emerge which I would like to share.
Firstly, the commentators who did their best to destroy market confidence by jaw boning were wrong.
Their claims were baseless. They are never accountable, but nonetheless the effect of statements claiming that the real estate market was to fall 20%-40% is simply irresponsible. Of course, they have now all gone to ground or revised their forecast.
I keep saying that if someone like me, with 30 years’ experience was being tested on what was about to happen, how can someone I never see at an auction or open for inspection, make bold assumptions about levels of demand and supply?
This year despite the negativity, COVID and the lockdowns, Melbourne has fallen approximately 7%-8%. Melbourne has proven again to be very resilient.
A very modest fall indeed.
The falls will now stabilise and prices start to increase from what I am seeing.
Residential property or bricks and mortar will be a sound investment over the next 3 years in my opinion.
The recovery usually begins in the middle of the pond.
When you throw the pebble to the centre the water then ripples out.
I have seen this in previous recoveries.
Higher end property and family homes priced from $1.5m to $4m are performing well. As a buyer’s agent, I have to move swiftly as is the strength of this sector.
Desirable property is usually located within a 15km radius of the CBD. Close to good schools, public transport and amenities.
Growth will accelerate in these inner areas first as these properties have fallen the most.
Here are some statistics to support my theory!
Median house price rises in the September Quarter according to REIV
- Brighton – 14.8%
- Abbotsford – 23.5%
- Hawthorn – 5.1%
- Kew – 11.6%
- Malvern – 2%
- Prahran – 13.3%
- South Yarra – 28.8%
- St Kilda – 13.2%
- Toorak – 28.4%
COVID has hit some socio economic and demographic groups harder than others.
Workers in food manufacturing such as meat processing and abattoirs for example, have been faced with reduced hours and shutdowns, whilst those workers exposed to hospitality, travel and retail have been severely affected.
To the contrary, wealthier Australians and many professional occupations that could transfer work from office to home have been affected to a lesser extent.
- Our markets have been shocked and have stagnated.
- This is short term, especially for residential property which will see an increase in demand over the next 3 years.
- Regional will surge. Particularly the Victorian cities of Geelong, Ballarat and Bendigo.
- I have been buying property for clients in Geelong for the last 2 years, a strategy that on reflection looks to be very sound.
- The easing of credit conditions following the Royal Commission will benefit property greatly. The easing of credit always does!
- Interest rates are low and falling to the lowest levels in my lifetime. This can only be good for property and is fuelling the growth at the top end of our property market.
- Both State and Federal Governments are committed to massive infrastructure spending on public transport and amenities.
- Trade with Asia and particularly China will return.
- Construction activity will be buoyant.
- There will be a significant recommencement in immigration and foreign student arrivals as soon as COVID conditions allow. This is a major industry for Victoria.
- Activity will be unusually busy throughout December and January, aside from the main public holidays.
- Few agents will close for Christmas holidays. Most have already had 6 weeks off during lockdown.
- Longer term, COVID will accelerate property trends that had already started to shift. Millennials, a very large population demographic, will move out of the inner city to the suburbs.
- That is a reversal of the trend we have seen for the last 15 years.
- Affordability of inner city housing has driven this trend. So too the desire for more space and land as this demographic group approach the family stage.
- Consequently, the middle ring suburbs of Melbourne, close to schools, transport hubs, shopping, hospitals and other public infrastructure will flourish.
- This is a trend that is occurring in London, New York and other large capital cities of the world
- The inner middle west and northern suburbs of Melbourne will be in demand.
- Property with a home office is likely to surge in demand in the coming months.
- Home office is the most searched term on the Domain portal.
- House price median fell 0.9% for the month of September 2020.
- Median house price in Melbourne is $780,836.
- Year to date house prices are down 3.4%.
- Unit price median fell by 0.80% for the month of September 2020.
- Median unit price in Melbourne is $558,952.
- Year to date unit prices are down 1.4%.
Source: Corelogic 30 /9/2020
Contact Greville Pabst for independent property advice first on 03 9589 3886 or click here to contact us.