Today I interviewed three estate agents in different areas of Melbourne – to get an idea of where they see the residential property market today, and how it is likely to unfold over the next six months.
First up is Don Gallicchio, Director, Galldon Real Estate, Melbourne.
Q. Don, last year was pretty tough for CBD apartments with high vacancy rates, falling rents and people leaving the city. How is the market now?
Don. You are right, last year was tough. However, things are looking up in certain segments. If you exclude Student Accommodation and the poor-quality apartments sold to overseas investors - rents and values of apartments in good buildings have stabilised and are on the improve. For example, prior to COVID, an apartment in a good building would rent for $800 pw. Last year that apartment would rent for $600 a week, but now it would fetch around $750 per week. If you focus on the quality end of the market, many apartments are owner occupied and did not come on to the market during COVID, so that market didn’t see significant volume or price impact.
Q. Where are the renters and buyers coming from?
Don. With the prospects of international borders opening, the return of overseas students and the general exodus interstate ending, the mood for CBD apartments has improved. We are seeing interest from returning ex-pats, particularly Hong Kong and the US, as well as Aussies moving back to the city from interstate. We also saw hotels renting rooms on monthly agreements at low rates last year. However, those leases are now ending, so the tenants must find city apartments to remain in the CBD.
Q. So in a nutshell, how does the CBD apartment market look over the next 6 months?
Don. If you just look at apartments in good buildings, then the picture is improving and looking stronger each week. For vendors, it’s still price driven, and they need to meet the market, but there are definitely buyers out there. For the other properties, it’s still too early to tell when they will improve.
Q. Rebecca, you specialise in residential properties in the Hawthorn/Kew areas, how is the current supply of properties for sale?
Rebecca. This has been our busiest start to the year ever for property listings. This is explained by Vendors playing catch up for the past eighteen months, and the strong growth in property values. We have auctions booked up until early April. There is then a quiet period with school holidays, the Easter break and the Federal election due in May. Although some Vendors are holding off until June when stock levels traditionally fall, if vendors don’t lock in an auction campaign soon, they will effectively have to wait until Spring.
Q. So you are getting a good supply of properties in the next few months, but how about buyers?
Rebecca. We are still seeing plenty of pent-up demand from buyers, especially for well-presented family homes with little or no work required. Turnouts at opens are good and there are always multiple bidders at auctions. However I do have a few buyers who have sold and believe the media hype about the property bubble bursting. They are ‘waiting for the market to cool’ and so far have only lost money as prices continue to rise. I think they will regret their decision to hold out.
Q. Where do you see the market in six months’ time?
Rebecca. We have two elections this year, one Federal and the State one at the end of November. Traditionally buyers like to wait and see what happens in the run-up to elections. But property doesn’t appear to be an election issue federally, so I don’t think it will impact on property prices. It's too early to tell with the State election. Given the strong buyer demand, I don’t see prices falling and there will continue to be strong demand for family homes. I also think rising interest rates will not have much impact on property values in the inner east, as the buyers usually have plenty of equity. Even buyers who have borrowed heavily can lock in low interest rates on long term fixed loans, with the intention of paying them down as quickly as possible.
Q. Greg, how is the current residential housing supply in your area from Mentone to Frankston?
Greg: There is still a massive supply shortage of all types of properties in the bay side suburbs – particularly sought after are two-bedroom townhouses and properties up to $700,000. Our biggest problem is getting the properties to sell, as the demand is so strong.
Q. So what has changed to make so many people want to live bayside?
Greg. That’s easy, it’s all about accessibility and lifestyle. I guess the lifestyle has always been here with beaches, the Bay, parks and quiet streets. However, the game changer has been the massive amounts spent on infrastructure by the government – the Frankston Freeway, the upgraded rail line and new railway stations. These combine to make large areas of residential land more accessible to the rest of Melbourne.
Q. So who are the ‘new buyers’ entering the market?
Greg. We have seen the exodus of people from Melbourne to the country. These bayside suburbs give people the space they want with great beaches, without having to leave Melbourne. Properties are affordable, and working from home is now a viable option.
Q. Where do you see prices heading?
Greg. I have never seen unemployment under 4%, the banks keen to lend, low interest rates and the prospect of rising rates doesn’t seem to deter buyers.
We are seeing high clearance rates and an average 5.5 bidders at our auctions. These are all positives for property that don’t indicate a slowing of demand from buyers.
It’s good to hear how estate agents ‘at the coal face’ see the current market. Although crystal ball gazing is always risky, what these agents see from talking to buyers and sellers suggests the market is not ready for a fall.
From what we can see from managing property sales for vendors, we at Tower would support these views.
Regards
Robert Allanadale, Director, Tower Property Advisory