Predicting Melbourne’s residential property prices is a mugs game – just ask any bank economist or property expert. To be fair however, their predictions are based on historical data which may be up to 6 months out of date.

I prefer the views of real estate agents who are dealing with buyers and sellers on a daily basis. They see what is currently happening in the market and are well placed to predict where it will be in the medium term. Hence, I have questioned three agents in different areas of Melbourne – the North West, Inner East and the Mornington Peninsula - to give you an insight as to what is happening to house prices in those areas and what to expect.

The first agent is Jason Sassine, Principal/Director of Jason Real Estate based in Tullamarine.

Jason, how do you see the supply of properties coming on to the market and do you expect a surge in Spring?

I see a slight increase in properties from this time last year as a number of vendors held off selling last year. Many expected interest rates to fall, but as that hasn’t happened, they are deciding to sell. It is particularly evident with landlords selling due to Land Tax.

On the demand side, who is buying and are attendances up at opens?

Owner occupiers are the main buyers attending opens. Any standout property attracts good interest, but we are seeing about the same level of buyer interest as last year.

Is there a change in ‘days on market’ to sell properties and are vendors discounting?

If priced correctly, properties will sell at auction. We are however seeing price reductions in house and land packages in new estates with rebates, upgrades and free solar etc being offered.

Are you seeing any distressed selling due to interest rates or the economy?

Not in the established areas as unemployment is low and people seem to be handling the higher rates. There may be some selling pressure starting to show in the newer Estates where home equity is low.

Are the banks still lending?

Banks seem keen to lend but borrowers have to meet strict criteria including having to service the loan 3% above current rates. The buyers we see generally have good borrowing capacity.

Now for some crystal ball gazing – where do you see property prices at Xmas?

Unless interest rates have a big move in either direction (unlikely) then I see prices as being about the same as they are now, therefore stable.

Next are the views of Justin Long, Director at Marshall White Stonnington. Justin covers the areas of South Yarra, Toorak, Malvern and Armadale.

Justin, how do you see the supply of properties coming on to the market and do you expect a surge in Spring?

We are seeing a small increase in supply, but nothing significant. Many people are holding off selling their property until they have found the right property to buy – and that can take some time.

On the demand side, who is buying and are attendances up at opens?

Attendances at opens have reduced. Last year we were seeing 20 people attending with one or two buyers. Now we are seeing 10 people at opens with one or two buyers. Most buyers are locals with few overseas buyers.

Are you seeing a change in ‘days on market’ to sell properties and are vendors discounting?

Vendors with lesser quality properties may have to lower their expectations, but if the property is priced right, it will sell without having to discount. Although we are seeing an increase in the use of EOIs to sell properties, I believe auctions still provide excellent outcomes. Throughout an auction campaign, you learn a lot about buyers - you don’t get that information with an EOI - and it helps set the reserve. EOI’s are more suited to high end properties and luxury apartments. We get good results at auctions as it encourages open competition.

Are you seeing any distressed selling due to interest rates or the economy?

There may be some pressure to sell but not much. No one has lost their jobs nor have wages been cut. I am not seeing any mortgage default with the vendors I am dealing with.

Are the banks still lending?

The banks are slow to process loan applications and are cautious about approving a loan. However most buyers are well organised and already have pre-approvals in place.

Now for some crystal ball gazing – where do you see property prices at Xmas?

I think prices will be around the same as they are now. There has been zero net growth in property prices in the past two years, and that should remain.

Finally I spoke to Jackie Wright at The Coast Real Estate in Balnarring. Although Balnarring is not exactly in Melbourne, Jackie does cover the Mornington Peninsula which is becoming urbanised.

Jackie, how do you see the supply of properties coming on to the market and do you expect a surge in Spring?

We are seeing a strong supply of properties coming on to the market, especially in the low $1m price range.

Many of these are older homes and were in the rental market. Changes in legislation and Land Tax are some of the reasons owners are selling, although there are also deceased estates, often families can’t afford the increased costs of maintaining a holiday house.

On the demand side, who is buying and are attendances up at opens?

We still have sea-changers buying in the area and people are upgrading their homes, especially as building costs have risen and there is a shortage of tradesmen. We have few open for inspections and prefer to give private inspections. This is more efficient for buyers who can inspect multiple properties in one trip. Now with the upgraded roads, this area has become more accessible to Melbourne.

Are you seeing a change in ‘days on market’ to sell properties and are vendors discounting?

Days on market have certainly lengthened – now vendors should expect at least 90 to 120 days. For properties over $3m the market is very slow and vendors can expect to wait 6 months or more. Buyers are reluctant to make a decision hoping for a lower price or to find a better property at the same price.

Are you seeing any distressed selling due to interest rates or the economy?

We are not seeing distressed selling due to financial pressures. Its more from people moving into aged care, children don’t want to maintain the property and by deceased estates.

Are the banks still lending?

Banks seem happy to lend but many of our buyers don’t need finance. Buyers who want a contract ‘subject to finance’, usually have a pre-approved loan, and 14 days are sufficient for final approval.

Now for some crystal ball gazing – where do you see property prices into the future?

In Balnarring I see properties worth around $1m stabilizing until Spring next year before they start to increase. Prices have already pulled back from their strong growth during COVID – for example an $800k property pre COVID would have sold for $1.2m during COVID and should now sell for $1.05m. Higher value properties on the Mornington Peninsula will struggle to find buyers until the market settles. A recent example is a family estate valued at $6m during COVID struggled to find a buyer and sold to a neighbour for just over $4m. Another example is a property purchased during COVID in the low $4m’s, had significant improvements carried out since and struggled to sell for $3.25m.

Takeaways:

• House prices are expected to remain stable with no real change in either supply or demand, except on the Mornington Peninsula where the supply has increased significantly and days on market have lengthened;

• Banks are selectively lending;

• Generally there are no forced sales due to interest rates or the economy;

• If you are considering a sea-change to the Mornington Peninsula, it could be time to start looking.

I hope you find this informative and of some practical use. If you have suggestions for topics of interest, do send me an email at robert.a@towerpa.com.au and I can cover them in my next blog.

Regards, Robert Allanadale Director m: 0418 517 643