Listings across the major capital cities are at a 12-year low!
A report released by Westpac in March confirmed that stock listing in the major capital cities were at a 12-year low. The Westpac report revealed that Australian homeowners selling intentions have increased, with one in three saying they are planning to sell in the next five years. Of those with plans to sell their home, one in 10 is already in the process of putting their homes on the market. However, with so much pent-up demand and new demand, it will take a little while for the market to rebalance.
What we are experiencing now is a strong seller’s market. It is a difficult time to buy, demand is high and prices are on the rise. Pent up demand is creating a backlog of buyers out in the market. There are people everywhere inspecting property and bidding at auctions. It is not uncommon to have 5 or more unsuccessful bidders at auction which means they are returning to the market to compete against new buyers.
Our advice in this market is to is try to keep your cool, don’t get frustrated keep persevering and maybe, more importantly, be ready! If the right property comes up be prepared to act. Desirable properties are selling fast, private sales are converting to boardroom auctions and scheduled auctions are selling before auction day. If you are interested in a property make sure the selling agent is aware, or you might find it is sold and you didn’t even get a chance to place an offer. Lastly, make sure you are talking to a mortgage broker or banks about your finances. Loan applications have been coming in thick and fast, and many lenders are struggling to keep up with demand.
Clearance Rates and Interest Rates
Corelogic announced that Melbourne has now staged a full recovery from earlier downturns. Melbourne dwelling values have surpassed their earlier April 2020 peak by 0.2%.
Victoria’s auction market has achieved its highest success rate in 11 years, according to the latest report from the Real Estate Institute of Victoria. The state’s clearance rate for the month of February hit 84.8% from more than 3,000 auctions. This success rate beat the record of 84% achieved in 2010!
The RBA held interest rates at the historic low of 0.10 per cent in its April meeting. The RBA suggests that rates will remain near zero until 2024. The RBA has said it will only lift interest rates when inflation is sustainably within the 2-3 per cent band. The prospect of continued low-interest rates is providing property buyers with some assurance over their borrowing rates and payment obligations in the short to medium term.
Clearance rates and interest rates are often used at leading indicators in forecasting property trends. When auction rates are high and interest rates low it often indicates that people’s confidence in the marketing is growing. Increased confidence, leads to increased demand which leads to increased prices.
On the ground at auctions, we are seeing property after property fly past their reserves, by 100s of 1000s of dollars, even $500,000 dollars! These properties are spread all over Melbourne in family-friendly suburbs, urban lifestyle suburbs, bridesmaid suburbs and regional areas, where an influx of demand for people desiring a different pace of life and seeking a tree or sea change.
Melbourne’s rental market is a two-speed market and its vacancy rate is being weighed down heavily by underwhelming demand for rental accommodation in and around the city. The withdrawal of international students and overseas migration is affecting the inner city and CBD substantially, but suburban and regional locations continue to be a landlord’s market.
Usually, as we move towards the cooler months, stock listing and market activity slow but it will be interesting to see if this year is a little different. We expect that demand will stay strong, especially if supply does drop the closer we get to Winter.
There is a little nervousness in the air with the ending of the federal government support package Jobkeeper but hopefully, that is tempered by Australia’s continued low numbers of community transmission and the vaccine roll-out. The Victorian government is also attempting to provide tax relief for workers, businesses and households. There are tax cuts across payroll, stamp duty and land lax for eligible businesses or individuals.
There are also discussions about ongoing low migration numbers as the Federal Government continues to keep our national borders closed in response to the pandemic. We expect that demand for inner-city high-density housing will continue to drop off and investors should be wary about purchasing this type of property in this location.
Currently though the Melbourne property market continues to go from strength to strength. Buyers experiencing FOMO due to low stock levels are finding it difficult to negotiate and prices are rising. ANZ economists lifted their forecast for house prices nationally in March. In Melbourne, they forecasted prices to lift by 16 per cent this year, the largest single-year increase since 2010.