by Carly Susic
Are you wondering what’s happening with the Melbourne property market? As lockdown begins again in July, inspections have moved again to private one-on-one inspections and online-only auctions. We have been here before but this lockdown is different ….we’re now officially in recession. Plus, many homeowners had already put plans to sell on hold. As we head deeper into winter with the new restrictions in place, a typically quiet time for the Melbourne market, people are wondering if now is a good time to buy (or sell).
What happened during the previous lockdown?
Cautious homeowners understandably withdrew properties from sale during the last lockdown. We saw a number of properties transacted off market as sellers were nervous to spend money on advertising. With a scarcity of stock on the market, competition among buyers was still there. However demand (for quality homes) was dampened down compared to pre-covid levels. When restrictions eased, we saw an upswing in demand, so that may occur again when this lockdown concludes if the spring stock remains low.
Buyers might see more of an opportunity (we saw a drop in pricing in the last lockdown followed by an uptick in buyer demand as restrictions eased). However inexperienced buyers need to know how to navigate the market. Quality stock will again remain low at least until the traditional Spring selling season.
We will be transacting where we see good opportunities for both our buying and selling clients yet, as always with a conservative approach.
Buying a home – can you grab a bargain?
Buy low, sell high. That’s the old adage. So with growth potentially stalling, is now a good time to grab a bargain? There certainly is potential now and we expect to see more opportunities when the spring market opens up. It’s always good to consider the land value as well as the practicalities of the home in these scenarios.
Property isn’t like the ALDI special buys aisle
Just because it’s a bargain, there’s no need to buy an air fryer or ski boots if you’ll never use them. It’s easy to live with making an unwise purchase from ALDI. But buying the wrong property? It can cause long-term financial problems.
The chance of a bargain is no reason to buy a property that isn’t right for you. If the home has flaws, you’ll suffer when you decide to sell. Or, you simply won’t enjoy the property if it doesn’t fit your lifestyle. For example, it could be far from transport or amenities. Getting it cheap doesn’t account for those impracticalities.
Consider what you are compromising for the cheap price. A quality home? A poor location? Access to schools, transport or shops? The so-called bargain price may cost you in other ways. If an opportunity looks too good to be true? It usually is.
Agents can be very persuasive
If you’re thinking of buying, keep in mind that agents are not always on your side. Their job is to sell the property for the highest price on behalf of the vendor, not help you purchase the right home. Agents are under pressure due the restrictions imposed by the lockdown coupled with a lack of property on the market, therefore risking their chance of commissions. Keep this in mind.
Owners putting planned sales on hold
Now that traditional open for inspections and onsite Auctions are temporarily banned, many are waiting to see how the market fluctuates. So for buyers, there are slim pickings. Due to low stock on the market, buyers are still forced to compete for quality properties. We recently competed for a June Auction with 18 registered bidders. This is almost unheard of let alone in the current climate of a recession and global pandemic!
Taking advantage of slow markets
It’s a sad reality that people who have overextended their mortgage and lost their job during the pandemic may be struggling and the second lockdown will be an added pressure for many. But selling a home under duress is not always a hasty decision. It’s likely to be some months before homeowners facing this problem realise that selling is the only option they have left. (The people selling due to financial pain now were probably struggling before the pandemic took hold.)
Banks don’t like forced acquisitions and there are legal procedures to follow. So it’s possible that homeowners under financial pressure will decide to sell independently of the banks. This does present an opportunity for buyers. But it’s likely to be months away—if at all.
The key elements to understand about this scenario:
- occurrences will vary across Melbourne suburbs
- opportunities may be limited and varying
- these kinds of sales are difficult to identify (the agent is hardly likely to tell you that the vendor is desperate to sell)
- it is no reason for you to buy a property that isn’t right for your needs
- if you wouldn’t ordinarily buy it, then don’t buy it now
- buy the one you want and that you can afford when it presents itself to the market
A note on banks and finance
Lending restrictions are tight. Banks have learned from the global financial crisis ten years ago. You need to be prepared for scrutiny of your finances to prove you can make the repayments. Preventing risky prospects from making unwise investments naturally dampens demand.
Will Melbourne property prices drop?
Factoring in credit tightening, unemployment, and economic recession, we feel the market is certain to slow and prices are unlikely to see growth this side of Christmas. The federal government’s $25,000 HomeBuyer package may encourage people to consider renovating rather than buying, so this may further reduce demand. The new lockdowns will no doubt cause further job losses and insecurities so an opportunity to buy well now is there, it is however a double edged sword as sellers hold off going to market, more stock in the Spring should see further opportunities.
Will the property market bounce back?
Sadly, we don’t have a crystal ball to see the future. So, we can only make estimates based on our previous experience with Melbourne property market ups and downs. Trouble is, this is a situation the industry hasn’t faced before. We are always conservative in our recommendations.
Historically, property prices tend to bounce back (or increase) about five years after a recession. This may feel like a long time, but the Melbourne property market is always changing. When the market moves up or down it can do so very quickly. We are in an unprecedented situation so we have no historic insights to draw on.
What if I’m thinking of selling? Should I wait?
It is impossible to give blanket advice here. The Melbourne market is made up of many micro markets. Our advice on selling will be a consultative approach based on many factors including:
- the local market
- stock levels
- buyer demand
- property type
- your purchase intention – investment, long-term family home, fixer-upper, etc
We can’t give a cookie cutter ‘sell or not sell’ answer. Although, some agents will be pressuring vendors to sell so they can grab any listing they can.
Given the circumstances, if your market still has buyer demand and you need to sell this year you might be best to get in now. This positions you ahead of the predicted stock surge in spring when mortgage holidays and JobKeeper were scheduled to halt. If you want to take advantage of falling prices to upgrade, there could be an opportunity. If you’re selling quality, you should still expect demand from buyers, because there’s very little stock on the market. Of course, we always recommend you sell before you buy. Keep in mind that you are both selling and buying in a falling market and there may be limited properties to choose from when it comes to buying on the Melbourne property market.
There are so many variables in play that it’s difficult for us to give generic advice.
- First home buyers: there are still government incentives with the stamp duty concessions under $750,000 – this space has remained quite buoyant even through the last market downturn in 2018/19.
- Downsizers: you will take a bigger hit on the falling price of your sale than your purchase price—so it may be better to wait.
- Upsizers: you will enjoy the opportunity to look at properties that previously may have been out of reach (but stock is limited). In these circumstances you are always better to sell first, so you know what you have to spend.
- Holiday home buyers: if people have overextended, the holiday home may be the first to go, especially if it isn’t yielding the income from tourism market rentals. So there may be good opportunities here, but not likely till late 2020. Although, we are starting to see a shift to people moving to coastal or regional towns, taking advantage of new working conditions with a tree or sea change. Many costal and regional agents in our network are reporting strong demand from Melbourne.
Want our expert advice on the Melbourne property market?
Contact us for a free discovery session. We will meet with you to discuss your property goals, and give you expert, unbiased advice for buying or selling in 2020.