MELBOURNE PROPERTY MARKET ON THE MOVE
The sun is shining, traffic has returned to the streets, the shops are open, workers are starting to return to the office and there is a sense of optimism and energy about the city as the four-month-long lockdown in Melbourne comes to an end. And nowhere is the sense of optimism greater than in Melbourne’s property markets, which are starting to move once again driven by a combination of factors that suggest the COVID-19 lockdown was just a temporary pause to the market boom that saw dwelling prices reach a peak in March.
The factors that are driving the Melbourne market include:
- Property listings were up markedly in October.
- The number of properties going to auction is increasing.
- Auction clearance rates are matching or better than the same time last year.
- Prices are up by 0.5% so far for the month of November
- Time on market for property listings is at an 11-year record low.
- More buyers and sellers are in the market and transaction numbers are increasing.
- Extremely low interest rates are driving demand
- Consumer confidence is at a 7 year high
- Newly announced Victorian State Government incentives on stamp duty, land tax and support for first home buyers plus additional spending on infrastructure will further increase demand
For the month of October, the Melbourne market had the highest number of new property listings anywhere in Australia, recording a huge 26.7% increase in property listings, which equated to 44.057 newly listed properties.
Last weekend saw the highest number of properties listed for auction since June, just prior to the four-month-long lockdown. Last week there were 530 properties auctioned with a 73% clearance rate. Clearance rates have averaged around 70% over the last month.
Meanwhile, the REIV is reporting that properties are being sold quicker than at any time in the last 11 years, with the data showing that the average home in Victoria is listed on the market for just 33 days, the lowest number recorded since November 2009. The shorter time listed on market numbers is translating to an increasing number of transactions. Last week, 2,025 houses and 878 apartments were sold, an increase on the 1,944 houses and 907 apartments of the previous week.
Given the strong auction clearance rates, an increasing number of transactions and the low number of days on market for listings it is no surprise that median prices are now rising once again in Melbourne, with data for the first half of November showing a 0.5% rise in median dwelling prices.
It is also worth noting that sales of land in Melbourne’s growth corridors have been strong during the last half of 2020, driven by the Federal Government’s HomeBuilder grant, with a total of 2,057 lots sold in October 2020, an increase of 35% on the figures for September. The sales of land and new homes are likely to be further fueled by incentives announced in the Victorian State Budget.
The Victorian State Government budget announced a raft of new spending which will, directly and indirectly, fuel demand in Melbourne’s property markets. The key incentive will be Stamp Duty Discounts of 50% for newly built houses or off-the-plan apartments valued at up to $1 million. There will be a 25% discount for existing homes. The incentive will be in place until Jun 2021.
The Government also announced a $500 million Victorian Homebuyer Fund, which will help people who do not have a 20% deposit by contributing to the purchase of a property in exchange for equity.
Further initiatives include a 50% discount in land tax from 2022 which the Government hopes will attract new investment in build-to-rent developments and boost housing supply by up to 5,000 homes.
Infrastructure spending is another area which acts to the benefit of property markets, by fueling construction industry jobs. Victoria is already in the midst of a massive infrastructure building programme known as Big Build Victoria. The State Government has announced further infrastructure spending including $1.9 billion for new schools, $5.3 billion for new public housing, $1.46 billion to redevelop the Southbank Arts Precinct and $2 billion for the construction of new jobs.
Given that consumer confidence was at a 7 year high in November and that volume of new housing finance recorded the highest quarterly growth on record, it would seem that buyers and vendors are increasingly confident about Melbourne’s property market.
The combination of all-time low interest rates, extensive government incentives and improving seller and buyer confidence combined with pent up demand from those unable to act during the lockdown to drive Melbourne’s property markets to finish 2020 on a high.
AllainceCorp will publish a detailed analysis of the Melbourne market in December.
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