March was a challenging month for most in the Real Estate Sector but also a record in terms of transactions for some as Auctions were bought forward and many properties sold before and by private treaty. Our industry has had to adapt with Private Treaty sale now the most preferred method.
Whilst there is some evidence of online auctions, these in Victoria at least represent only a small proportion of total sales. Traditionally auctions represented approximately 30% of all sales but in recent weeks this percentage has fallen dramatically.
It is usual that when consumer confidence falls, so does the effectiveness of the auction method with vendors and agents wary of the effect a failed public campaign can have on achieving a positive result. Agents then and now are seeking to encourage vendors to sell before should a good offer be presented prior.
I can remember just before the Federal election in the midst of the Royal Commission into Banking attending auctions where no one turned up at all, so poor was the level of confidence with clearance rates dropping below the 50% range. The recovery was swift after the Federal election with Clearance rates shifting up again very quickly to 78% each week before this crisis hit.
So what happens next?
Well, nothing is good and nothing is bad. It simply is what it is.
Some of the most growth and learnings come from the most difficult times. The best agents I work with don’t focus on failure, they focus on the present and adapt to the current environment.
There are still lots of property that will be transacted in 2020. Approx 85%-90% of people will still have a job and still be able to pay rent. The Virus is for 6 months or maybe a little longer but when you buy property it is for 20 or 30 years. Those who look long term will do very well in this changed market.
Selection and good advice however in these times is paramount and more important than ever before. What I am seeing now is all of the stock that was listed 6- 8 weeks ago is being sold.
The tail is being mopped up and stock is not being replenished at the same pace as before. There is still buyer demand, interest rates are at record lows and we have Government support insulating the impact to property for at least 6 months.
There will be some fall out, but we have never seen this level of stimulus before either. When the market reopens fully again stock could remain tight which will underpin prices.
The level of unemployment will be the one caveat. In 1983-1985 I was studying Property Valuation at RMIT. We had a period of high unemployment that reached 10% and I was worried where my first job would come from? Housing prices during this period however, rose from a median of $52,500 in 1983 to $84,800 in 1986 despite this high level of unemployment.
I can remember too, the last recession between 1991 and 1994 unemployment reached a high of around 11%. Residential house prices remained flat for 5 years until 1995. There was a median house price fall of around 8% at that time.
There is always sunshine after the rain.
In the last 25 years from 1993 – 2018 Australian house prices have risen by an annual compound growth rate of 6.8%. Melbourne and Sydney have risen by more. Some economists are predicting unemployment to double from the current level, but this time we have low cost of money, record Government stimulus and a short supply of housing.
It’s going to be interesting to watch how the property market is going to tact over the next 12 months. Importantly, the right time to invest and buy property is when you can afford it and when it does not impact on your general lifestyle.
I give that property advice to young people regularly. Even for someone who has lived and breathed property all of my life. It’s difficult to predict cycles and history has shown that those waiting for prices to come down have been disappointed more often than not .
I am optimistic and here’s why?
Whilst I have not yet seen prices fall , buyers have become more discerning. A day does not pass that I am asked will property prices crash? My answer is a resounding no and those waiting on the sidelines for massive price reductions are going to become bitterly disappointed. It is my view that by the end of 2020 and first quarter of 2021 property prices will surge. In history , real estate has always lead the recovery and I expect Government will provide some incentive to the property industry if necessary.
The reasons for my optimism is as follows:-
- We have never seen this level of Federal and State Government stimulus before. It will buffet and delay any distressed sale activity
- Interest rates are at their lowest level in history and there appears to be more liquidity and willingness by the banks to lend
- Listings have disappeared. Stock levels are falling to worrying new levels
- New construction activity has ground to a halt
- There will be people who have enjoyed working from home and perhaps demand for the home office may increase.
The temporary nature of this crisis and the uncertainty of how long it will last is what has grinded many businesses to a halt, but it is temporary and it will pass.
During the last month there have been some very strong results:
92 Page Street, Albert park sold for $9.01m at auction on 23rd March .
20 Fairlie Court , South Yarra in need of renovation but in one of South Yarra’s premier streets sold for around $8m.
73 Hodgkinson Street Clifton Hill sold in February to my client for in excess of $4m for a renovated double storey Victorian terrace.
In two private off market transactions I have been involved with over the last month include a 2 bedroom older style apartment in Tintern Avenue Toorak which was negotiated and sold in the high $900k level through Hocking Stuart, South Yarra and
A 4 bedroom family home in Wilsons road Doncaster sold last week in excess of $1.2m off market with interest from 5 separate buyers
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