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Property Market update:  
Where to from here?

A lot changes in a month with the curve flattening and restrictions now being rolled back across various states. With such diverse commentary on the direction of the market over the next 12 months, it is hard to separate the informed commentators to those just creating a bit of noise. The main problem with making any forecasts is that the landscape is changing so quickly that a correct prediction now may turn out to be completely wrong in three months.

I personally think some of the predictions are wildly inaccurate. There have been forecasts of falls from 10% to 30% from a number of different sources. However a lot of these predictions were made on the basis that the restrictions would remain in place for 6 months, which is unlikely to be the case. Also the level of government support is unprecedented to keep people in jobs.

What is clear to date is that the market has held up remarkably well in Melbourne. There has not been the dramatic decreases in property prices that many were predicting just a month ago. According to the latest CoreLogic data as of April 30th 2020, house prices for Melbourne in April have come back a relatively modest 0.3% with the annual return still sitting above 12%.

While we are not out of the woods we expect the next 3 months to hold relatively firm only because supply is so low, with CoreLogic indicating listings are down 40% from the same period last year.  The supply will increase as we approach the end of the mortgage repayment holidays offered by the major banks, so you certainly need to keep your eyes on how this plays out.

In terms of Buyer demand, there can be no doubting this will decrease as a result of falls in consumer confidence, the increase in unemployment and the reduction in migration.

According to the Westpac consumer survey confidence in the Australian housing market has collapsed, recording the single biggest monthly fall in its 47-year history.

The survey, which measures Australian consumer sentiment, saw house price expectations plunge. The “time to buy a dwelling” index dropped 26.6 per cent – the biggest monthly decline on record. But at 82, the index is still above the GFC low of 67.1. But it is clear that nothing has a bigger handbrake on a property price growth than when people think they can buy it cheaper tomorrow.

While sentiment has changed, Australia’s love affair with property has not with Realestate.com reporting searches on its site up 35% with more popular areas showing increases of over 50%.

Unemployment is expected to peak above 10% over the next 3 months which is concerning but hopefully people can get back to work sooner as the economy improves.

In terms of overseas migration this will take some time to recover, however the borders are only expected to be closed for a maximum of 12-18 months. So this is also only temporary and as the borders are reopened, I can only see migration increasing dramatically as we have once again shown what a lucky country we live in. So the next 12 months may actually provide a great buying opportunity before the next boom.

While a recession appears imminent it is important to reflect on what impact previous recessions have had on the property market. It is worth noting that during the last recession in 1990, the national property market rose by 4.1%. Prior to that Australia experienced a short recession in 1982 and in that year the national property market also rose by 7.8%. While care should always be taken with these numbers as they reflect national figures which are not always consistent across states and the various sub-markets operating within it, it does give a bit of perspective as to the low likelihood of the dramatic falls.

If you are in the fortunate position whereby your employment is secure and you have money to spend, the next 12 months could provide a great opportunity. But be careful as it is always important to understand the various sub markets operating at any given point of time. For example, one indicator to look at is the unemployment levels at a suburb level. If the number is higher than the state average there could be a more protracted downturn and it may be worthwhile looking elsewhere. So as always, do your research!

If you would like to have a further discussion on the market feel free to give us a call.

Stay Safe!
Leigh McConnon

Property Management update


Well done to our Property Management Team, Rachel, Lily & Daisy who have been working extremely hard to keep our landlord’s and tenant’s informed as the landscape during this challenging time constantly evolves. As a team, they have been able to protect our landlord’s interest while also offering support to the people that need it. This has included in the first instance information on how tenant’s and landlord’s can avail themselves of various support packages. Where these have not provided enough support, the team have acted as mediator’s to work through the best solution for both parties with pleasing results across the board. This open communication has maintained a very healthy portfolio with arrears of only 2% as at today and only a small number of reduced rents. 
 
Whilst the way in which our business is used to conducting open for inspection and leasing of properties has changed dramatically, our team have been able to embrace new processes that were put in place early on and overcome the challenges securing a number of tenants for available properties.  Currently we have 3 vacant properties which we are confident will be tenanted very soon.
 
If you want to be part of a company that genuinely care, give Rachel a call on 0477 663 325.

Tip of the month:

What do median prices really tell you?

There is a heavy reliance on median prices when commentators are assessing the health of the market, however what do these mean and how reliable are they?

The median house price is the midway point of all the houses/units sold at market price (or sold amount) over a set period (monthly, yearly, quarterly, etc.). ... This differs to the mean price, which equates to the average price—adding the sold prices together and then dividing this by the number of sales. Put simply, if there were three sales and the prices were $1,000,000, $200,000 and $550,000 for a particular suburb the median house price would be $550,000. The mean would be $600,000.

If the sample size is large, the median can be a reliable measure, however if the period of time is short and the number of sales is low it can often be very inaccurate measurement. For example if looking at one month’s information for a particular suburb and there have only been a small number of sales you could see a dramatic increase or decrease in median prices. This can be dependent on the number of high end sales during the past month. Generally in a declining market, the areas that often have the biggest reductions in the median prices are blue chip locations such as Toorak or Hawthorn. However these mask the true picture as generally during downturns the supply grounds to a halt as people in these areas are typically high net wealth individuals who do not need to sell. As a result you do not see many high price homes on the market. This does not stop the commentators talking down these areas as locations to avoid even though they have consistently outperformed the wider Melbourne market for a long period of time.

So understand what these metrics are saying and only rely upon them if the sample size is large. A rolling 12 month median can often give an accurate picture of the health of a particular suburb as this is over a longer period of time and generally captures a large sample size.

There are other short term indicators that you can look at to determine the health of a suburb at any given point of time, these include the number of listings, % of stock in the market, days properties are on the market and individual sales compared to their previous results.

If you need any help make sure you speak to one of our advocates, Sam on 0404 148 700, Paul on 0422 258 940 or Leigh on 0448 394 151.
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