Melbourne’s housing market: the COVID-19 impact

A surge in 'off market' listings hits home

The lack of certainty around COVID-19 has resulted in a significant increase in ‘off market’ Melbourne properties being promoted by agents, with motivated vendors who may have been planning on selling in the near future urgently bringing their sales time frame forward.

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Amy Lunardi is a buyer’s advocate in Melbourne with Cate Bakos Property, a boutique advisory that has purchased over 900 properties since launching in 2014. She is at ground zero. Feeling the pinch of a property market turned on its head.

Here, Amy provides Melbourne property market insights from the front line – the current market sentiment, how the Commonwealth and state government new measures cancelling open home inspections and group auctions will change the methods of sale and buyer interaction, and the potential impact on tenants and landlords.

Q. What’s the mood like in Melbourne – for active buyers and sellers?

A. What all property owners, buyers and tenants are currently looking for is some kind of set of rules in terms of what the future could hold, but our current situation is unprecedented and we are still in the very, very early days of understanding how this crisis will affect our economy, our society and our property markets.

House auction
Street auctions are all about crowd energy, numbers, anticipation. But street auctions have been banned under the new government rules. . (Credit: Getty)

Q. How are the government’s COVID-19 social distancing rules affecting the property market?

A. Open for inspections and public auctions are no longer allowed, but private inspections and online auctions continue to be a viable way for real estate agents to market and transact. This week we have seen a surge in transaction activity.

Q. What are the concerns for agents around the new rules?

A. Agents are worried that a possible full lock down could mean a temporary hold on inspection appointments, and they know that the likelihood of a buyer purchasing sight-unseen is low, even with the abundance of technology on offer to provide videos of properties or virtual floorplans.

Whilst we believe a full lock down may have a short term impact on the ease of purchasing homes, real estate may be considered as an essential service, (based on the industry underpinning the provision of accommodation), and private inspections could be allowed to continue, applying necessary hygiene and distancing precautions. 

house inspection
The housing market has moved to a one-on-one (+ 1.5 metre physical distancing) transaction process. . (Credit: Getty)

Q. Tell us about the surge in off market property listings

A. This lack of certainty around increased lockdown measures has resulted in a significant increase in off market properties being promoted by agents, with motivated vendors who may have been planning on selling in the near future urgently bringing their sales timeframe forward.

I’ve had more calls this week from agents than I’ve had in the last 6 years. Many auction campaigns are being converted to a private sale, and any campaigns still running to auction (online or phone) are being managed by agents whose vendors are more open to considering selling prior. We’ve also seen a large number of properties being withdrawn for sale, with stylists and agents noting that anyone who doesn’t need to sell is justified in reconsidering their position. 

Q. Tell us about the current buyer profiles

A. For now, we are still seeing buyer activity, with these buyers falling into a few categories:

  • People who have recently sold, and need to purchase a new home, or have other strong reasons to settle into their own home. For example, a baby arrival, school starting in a zoned area in 2021. 
  • Keen buyers who have strong job security and cash flow buffers. 
  • Opportunistic buyers hoping to take advantage of the current surge of off markets and motivated vendors.

Q. What’s the future forecast for the Melbourne housing market?

A. After this short term flurry of sales, we may well see a significant drop in supply as vendors sit tight and only transact if necessary.

No matter how we look at it, the demand for property is going to take a hit with our increasing unemployment and decreasing consumer sentiment. However, our record-low interest rates and a significant decrease in supply, combined with Federal stimulus, SME tax relief and crisis-payments, and our government’s swift action may provide some buffer in terms of insulating property prices. 

online house auction
Online housing auctions will transform the buyer-seller experience. (Credit: Getty)

Q. How has the bank’s easing of mortgage repayments impacted buyer and seller sentiment?

A. Our Australian banks have been forthcoming in sympathetic relief for those who need repayment holidays and it is fair to say that our government, our lenders and our property owners alike are committed to avoid panic sales if at all possible.

Price retraction and asset value losses will not serve any of us if we sell and our leaders not only realise this, but are committed to avoiding it.

Q. Has the rental market been impacted by COVID-19?

A. It’s early days, but so far we’re seeing demand in the rental market not yet taking a hit, with property managers reporting enquiry levels still remaining strong.

Many tenants have already faced job losses, however there has been a quick response from government to provide immediate increased support through Centrelink payments. We anticipate the rental market for lower priced properties to continue to be in demand, and those landlords commanding higher rents possibly having to consider providing short term rental relief through discounts or deferments. Some tenants will have the opportunity to move back home with parents, but many will continue to face the need to have a roof over their heads, and will cut their discretionary spending to ensure they can pay their rent to their best ability.

Q. What’s your opinion on Melbourne’s future housing market?

A. Right now, nobody can forecast the effects of these changes into the future – not one month ahead, not one year ahead, and it would be irresponsible for anyone to make predictions around the future of the property market and how long this uncertainty could last.

Q. What advice do you have for Melbourne buyers and sellers

A. Property owners and buyers should be assessing their decisions based on their job employment security, their cash flow and savings, and their short term needs. They should certainly not making a rushed decision out of fear or panic. Ideally they should be seeking the advice from a trusted accountant or financial planner, and leaning on a professional and licenced property buyer if they feel daunted by the task of tackling a property purchase in these rapidly evolving times.

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