Melbourne Market Update

Is Melbourne’s love affair with auctions over?

Quarter 1, 2020

Market Overview

It’s March 25th and last night the Prime Minister announced that effective at midnight tonight open for inspections and public auctions have to stop.

The landscape of what can be done and can’t be done in society is changing so quickly it is difficult to put pen to paper with any confidence that this information will still be accurate when it is read.

However, there are a couple of statements that will hold true today, tomorrow and the day after that
We all know, our world is in the grip of what the World Health Organisation (WHO) has classed as a “Pandemic” regarding the virus known as COVID – 19 (aka ‘CORONAVIRUS’). It is not only affecting our physical health but also the health of our economy. The government, scientists and medical personnel are doing their best to fight the spread of the virus whilst continuing the economy in the best shape it can be.

Will this affect the Real Estate market?

Yes. It will.

However, before we talk how let’s talk for how long. The property market cycles through periods of growth, stability and decline. COVID – 19 has unexpectedly halted a period of significant growth in Melbourne and Australia’s other capital cities.

What we wish to emphasise is that the impact to property market is temporary. It maybe 6 months of unknowns but the property market will bounce back and return to normal.

How will operations be impacted?

Social distancing and isolation mean the real estate industry must change the way it works.
Ray White managing director Dan White told Domain “Our members will still be able to host virtual property tours, private inspections and on-line/digital auctions.”

The president of the Real Estate Institute of Victoria, Leah Calnan, told 9News. “There are a large portion of real estate agents that are prepared to make the transition across to technology and digital sales and auction processes, and the others will need to learn quickly on their feet.”

Melbourne’s strong love affair with public auctions may have come to a temporary end but real estate agents are busy providing alternative solutions, including online auctions and the possible return to favour of private sales.

What will be the impact to the market?

Experts are divided on what will happen with the property market. Many experts predict that property values will fall, and others believe that whilst property transaction volumes are likely to fall in the coming months, the values may remain more stable.

It will be interesting to see in Quarter 2 what will happen to the figures for “Monthly Sales at Auction” even though online/digital auctions will be available we expect a sharp decline.

Consumer sentiment or confidence is reducing and there will be a contraction of activity. Nervous vendors that are not required to sell will sit and wait and nervous buyers will keep their hands in their pockets. Even those with pre-approval may feel cautious about buying when their future financial situation seems less clear.

We don’t say the next statement lightly but for those with job security or a steady income this maybe present a unique opportunity to buy property at a great price with an incredibly low interest rate. In late March the RBA slashed the interest rates to a record low 0.25 per cent in an emergency cut due to the coronavirus pandemic. The Reserve Bank governor Philip Lowe said “said the cash rate could be at this level for some years.”

For anyone concerned about meeting their mortgage repayments there is assistance out there, speak to your bank, mortgage brokers, financial advisers. There may be financial help available to you.

Was Quarter One all about the Coronavirus?

No. It is a common saying in Melbourne that you can experience 4 seasons in one day, this seems to be what has happened with the Real Estate market in Quarter 1. Corelogic announced December 2019 delivered the 5th consecutive monthly rise and the largest month-on-month gain since 2003. This update took national dwelling values into positive annual growth for the first time since April 2018. Momentum was building, confidence was returning to an all-time high!

January was quiet on the surface as holiday makers and families enjoyed the time off. Real Estate agents were busy getting listings and gearing up for a busy February. February our enquiry levels were through the roof, homeowners and investors alike all wanted to purchase. The Melbourne market continued to reach new heights. Popular properties were drawing large crowds, bidding wars were erupting with 5 to 7 bidders frequently battling it out to secure the keys. We were returning to some of the highest clearance rates in 4 years.

However, the start of March rumblings about the impacts of the Coronavirus not only on health but on the economy saw consumer confidence start to slip. Each Federal and State Government announcement lockdown more services and unfortunately more people started to lose their jobs.

We end Quarter 1 in Stage 3 lockdowns. The school holidays were brought forward in Victoria and Easter (which is traditionally a quiet time in Real Estate) is just around the corner. With the holidays and Easter we have a moment to catch our breaths as we adjust again to this ever changing landscape.

There are always opportunities and options for inspecting properties. Please feel free to contact us to seek advice on how to traverse this landscape.

Suburbs to watch

The suburb reviews were written in early March before strict self-isolating rules came into play. We have decided not to rewrite them, as we believe the reviews provide a longer-term view of the suburb. Local shops and business may close during the pandemic, but we believe that given time they will return. The pandemic does not alter their locations, access to transport, their parks, schools and essential amenities.