This week, Tower Director Robert Allanadale spoke with Jason Hearn, a Director at Woodard’s in Camberwell, to get his views on where property prices are heading in the Boroondara area, and what could cause the market to stumble.
Q. What is currently driving the residential property market?
Jason: It's no secret that demand currently exceeds supply which is driving prices into record territory. This perfect storm is caused by record low interest rates, banks keen to lend and pent-up demand following COVID restrictions.
We are also seeing expats returning from overseas to live in Melbourne. They are generally cashed up or already own a property which they then sell to upgrade.
First home buyers usually purchase an affordable property, then after four or five years, upgrade to a larger and better property. However, as they can now borrow more money for the same loan repayments, they are purchasing the larger property now in favour of the smaller one.
Although we hear about some properties selling for hundreds of thousands of dollars above reserve, these are relatively few and are always well presented and in sought after locations. The published numbers for Boroondara show an increase of about 17% in the last quarter with values getting close to their earlier highs.
Q. Do you see increased property supply killing this market?
Jason: We are doing an increased number of appraisals for people thinking of selling, but by no means are we doing a massive number of appraisals. It is just getting back to the pre-COVID numbers.
I do not expect these properties to have any impact on property prices when they come on to the market in the next few months as the demand is so strong.
Q. What do you see that could kill this market?
Jason: The biggest threat to the current strong demand would be a rise in interest rates, or the introduction of lending restrictions by the banks.
At present I cannot see either of these occurring, so until they do it will be business as usual. However once short-term interest rates start to rise in the US, then ours may well follow.
Q. So where do you see property prices heading in the next six months?
Jason: No one really knows of course, but from the current demand that I’m seeing for residential property, I think the prices will continue to rise, although perhaps not at the rate we have seen in the past quarter.
My guess is that we may see another 10% increase by September, then it may flatten out.
Q. Now for the question everyone asks when moving to a new house, should you buy or sell first?
Jason: I get asked that a lot and my answer is always the same. You should always sell your property first before buying a new one. That way you know exactly how much money you have to spend, and you don’t have the financial worry (or expense) of having to pay for the purchase without the sale funds. There is the benefit of not having to rush your sale so you are able to bargain better without the pressure of having to sell.
Your stress levels are guaranteed to be far lower if you sell first before buying your next property.
Robert Allanadale, Director