The property market is reporting some promising early market indicators since lockdown restrictions were lifted. Is now a good time to buy a property? Or should investors and buyers adopt a wait-and-see attitude?
Conditions in the real estate market have remained relatively stable during the COVID-19 lockdown. We look at some possible reasons for this.
Consumer confidence is up
More than half Australian home buyers think now is a good time to buy according to a report by Finder. According to the survey, 59% (up from 42% last year) think that this June is a good time to buy. The younger generation is keener to take a risk and buy during the pandemic than the older generation.
ANZ Roy Morgan weekly consumer confidence index has seen a steady rise for the past 9 weeks despite the pandemic. The index showed that consumer confidence is only 9% lower than what it was before the coronavirus outbreak. This means that people are feeling more secure about their future.
Also, the people most affected by unemployment as a result of the pandemic were the least likely to owe a mortgage.
Home loans in Melbourne have also seen a year on year increase by 3.5%. Buyers are ready and want to buy a home despite an uncertain economy.
The market has remained resilient
According to real estate data firm, CoreLogic home value index results in May show that the national index has dropped by 0.4%. As expected, Melbourne’s property market reported the highest drop in May at 0.9%. June figures are not out yet.
According to CoreLogic’s Head of Research, a drop of less than half a percent of the previous month nationwide is an indicator that the market is holding.
At the height of the pandemic, banks have taken precautionary measures to ensure that homeowners do not default in their mortgage payments. As a result, there have been fewer distressed sales in the market than anticipated.
All the early signs are showing that the property market in Australia is not as adversely affected by the COVID-19 pandemic as first predicted.
Sales activity is on the mend
With restrictions lifted earlier than expected and real estate activities resuming, the national sales activity has bounced back by 18.5% in May against a revised drop of 33% the previous month.
This week, preliminary auction clearance rates in Melbourne and Sydney were up by over 60%. In Melbourne, there were 474 homes on auction with a success rate of 61% – doubled the volume of the previous week.
May has seen an increase in home sales and new listings. Total rolling listings in May rose by 22.4% as more sellers tested the market. The absorption rate was high with total listings falling back to -2.9%. This means that homes were sold as they come on the market. It is important to note that the jump in volume is relatively low compared to what it was in April – at the height of the pandemic.
Where to buy?
There are more listings in the outer suburbs of Melbourne. Strong demand is keeping prices in the inner-city stable, but the price point is still sensitive. A slight increase in price can result in no sale. If you are a seller, get the best assessment for your property and sell at the right price. If you are a buyer, look further afield to the outer suburbs. You could find a good buy.
Buy or Build?
Both options are equally doable in the current circumstances. The Government’s HouseBuilder Scheme gives you the option to buy a house and land package or buy an existing home and renovate it. There are strict caveats attached to this $25,000 Scheme so be sure to read this first before you commit. If you would like more information on the Scheme, please refer to our earlier article on the topic.
One of the criteria to qualify for the Scheme is the capped value of the property. If you are buying an existing home to renovate, the property must not be more than $1.5m. So where are the suburbs with the most homes under $1.5m?
Here’s a snapshot according to CoreLogic’s data:
|Suburb||Number of properties||Median value|
|Melbourne Outer East||130,307||$785,669|
|Melbourne North East||108,354||$679,160|
The SMH reported a significant drop in Chinese buyer enquiries in Australia in May. Data published by Juwai IQI showed interests have slumped by more than 65% since April.
Chinese investors typically flow into new apartments which could potentially mean more choices for local buyers. The median price difference between an apartment and a house in Melbourne is less than $150,000 compared to three years ago. There are many contributing factors including affordability and better quality built. Traditionally, first-home owners will try to buy a house over an apartment but at the end of the day, it is a lifestyle choice.
Thinking of buying or selling? Contact your local Area Specialist here