Each quarter we survey a number of residential real estate agents across Melbourne to get their views on what is happening in the property market and where it is likely to go in the next six months.
We ask a series of questions and here is a summary of what they had to say. The survey was conducted before the recent announcement allowing agents to open.
Firstly, what business have you been doing during Stage 4 Lockdown?
In Stage Four Lockdown, no one can enter a property unless they live there. This means vendors can’t get tradesmen, gardeners or cleaners to work on a property to prepare for sale. It also means that agents can’t inspect property and certainly can’t show a prospective purchaser through.
Despite this, there have still been some sales over the past three months.
Off-the-plan sales and land sales were still taking place, although at a far reduced number. Some houses have also been sold where the purchasers had inspected the property prior to Stage 4 Lockdown. However, as the time went on these properties have been reduced in number.
Some agents reported selling property where the purchasers were desperate and were prepared to buy, just relying on photos taken by the vendors. Again, there are not many of these.
Needless to say, sales volumes have greatly reduced. Some agents have been using this time to focus on staff education in anticipation of restrictions being eased. It goes without saying that all are very keen to start business again.
How successful are virtual auctions?
All agents we surveyed have held virtual auctions using different platforms. Most say they obtained satisfactory results and similar clearance rates to on-site auctions. However, there is not the same sense of urgency that can be created at an on-site auction, although some strong sales were achieved.
As bidders must register and provide their credit card details to bid, the agents believe this results in only genuine bidders bidding. It also allows them to get to know the bidders better than where there is no registration requirement.
However, it seems that some bidders were reluctant to bid unless they could see other bidders. Those platforms where everyone can see everyone else were better than just where the auctioneer only could see everyone and called out the bids.
Virtual auctions were considered better than no auctions, but it was clear that all the agents preferred to hold on-site auctions. It may take a little more time before purchasers to fully embrace virtual auctions.
What will property supply look like short term once Stage 4 is over?
Agents report that property listings and sales are well down during Lockdown. The REIV believes sales were down 80% in August. This suggests there are a very large number of properties in Melbourne that have not come on to the market yet.
Now not all of those properties will come onto the market at once, but there still will be a larger number than usual, once property sales get underway. Some vendors will prefer to wait until the market has stabilised, perhaps into mid next year before selling.
There are other vendors where it is essential that they sell. We know of a number who have purchased a residential property earlier in the year and are unable to sell their home. They are carrying two mortgages. There are others are in aged care facilities and need to sell to meet their liabilities.
All agents have booked a number of properties to be auctioned once the Government allows properties to be properly marketed. Now that this has happened, properties requiring presentation works will still take 3 to 4 weeks to prepare. Based on a four-week marketing campaign, auctions will be pushed to November and December. That will then be the peak selling period which will carry over into January and February.
Agents also expect a busy time giving appraisals once restrictions are lifted.
What is the likely demand for property once Stage 4 is over?
All the agents surveyed said that there was strong demand for residential property in all price ranges with the possible exception of apartments.
There have been vendors who have sold their home earlier this year and now, as purchasers, are unable to buy. As renting was difficult, they were effectively homeless. These have become desperate buyers.
There have been some reservations about predicting how long this demand will last. Much will depend on when COVID-19 is controlled and the impact it will have on the economy. If we get a ‘third wave’, then the market will be severely impacted.
Although low interest rates will support demand, if unemployment continues to rise after JobKeeper finishes, this will soften demand for property next year.
Many essential workers have been earning good money during Lockdown, and some inquiry for investment property is being seen from this group.
The CBD apartment market is being hit. With no overseas students or tourists, rents are coming down and it is taking longer to find a tenant. As vacancy rates rise, it is expected that these properties will face price declines.
Where are property prices heading in the short term?
Although bank economists are predicting property price falls of up to 10% this year and a further 10% next year, and prices have come down by 3.2% in the June quarter, agents believe that once they can properly market properties, they expect prices to remain stable in the short term.
This is due to the pent-up demand for property, a lack of supply and the low cost of debt.
However, some agents believe there is a risk that demand will reduce mid next year, and supply will increase due to some homeowners experiencing financial hardship. This will lead to price declines.
Other agents even predicted price increases next year once COVID-19 was controlled, as seen in some other countries notably New Zealand.
Are there vendors under financial pressure to sell?
Agents are not seeing any vendors selling due to financial pressure or MIP sales. This is mainly due to the Government support given with JobKeeper and the moratorium by banks requiring loan repayments. However, both are being phased out over the next six months.
Agents are expecting to see some forced vendor selling in 2021, particularly due to small business failures, vacant shops in many strip shopping centres and rising unemployment.
And finally, a tree change that we can see.
We also speak to agents across the State. They all report that there has been an enormous increase in enquiry for property from Melbourne residents.
Properties that they have had on their books for years, have recently sold. Properties that come on to the market are sold within days to Melbourne buyers. There is a clear exodus of people from Melbourne to the country.
This is not altogether surprising given the ability to work from home is now established along with the affordability of country property. Expect prices in country towns with good access to Melbourne to increase.
Easing COVID Restrictions.
As from Monday 28th September, residential estate agents will be open for business!
Agents are now able to conduct limited property inspections with buyers and renters which is great news for everyone. Outdoor work such as gardening can be resumed and, in some circumstances, cleaning as well as painting can also be completed.
We have found that we were able to arrange presentation work by our tradesmen, but we expect that all trades will be very busy over the next few months.
If you are thinking of selling, we believe it is better to sell sooner rather than later.
We live in interesting times.
Robert Allanadale
Director
We provide a complete sales management service for vendors.
Visit us at towerpa.com.au or call Mathew Green on 0422 638 336.