15th May 2009
With minimal stock available, Melbourne's market has held strong, even with a lessened demand.
There's little debating the fact property demand is down in Melbourne and Victoria as a whole, as consumer confidence is down.
But at the same time, housing supply is also low, as both new construction has slowed and existing homeowners and investors think twice about selling their property in the current climate.
"There's been very little construction, so the stock is tight right now," says Michael Yardney, director of Metropole Property Investment Strategists. "What that means is that prices that started to drop in the end of last year in those lower price brackets are now holding or starting to rise."
With interest rates down, there's also been a decline in distressed homes, meaning fewer have been forced to sell either.
"With Victoria continuing to face a shortfall in housing construction, our property market will continue to be undersupplied, keeping prices for property strong," says David Harris, franchise manager for LJ Hooker Victoria/Tasmania.
While top-end property sales have remained slow, the latest trend in supply has helped push along the activity in the lower end, led by first homebuyers. Population growth has also been a factor.
"Victoria is experiencing a huge population growth, and the latest economic data from the ABS proves that the state is weathering the global downturn somewhat better than others," says Harris.
Auction rates are back to above 70% again in Victoria, with demand strong both in Melbourne and some surrounding new growth areas.
"Many of our offices in these growth areas such as Cranbourne, Berwick, Hampton Park, Rowville and Pakenham are all experiencing a shortage in stock and have seen intense bidding at auction, along with large and enthusiastic crowds at open homes," says Harris. "In many cases, properties are being sold well above reserve/listed prices."
Yardney agrees, saying 2009 has seen an upswing in demand, at least of the limited stock that is there.
"There's definitely competition out there," he says. "It's clearly changed from last year. The question that overhangs the market is has it brought forward demand? Will it last?"
Bringing demand forward
At the time this publication went to press, the fate of the first homeowners boost seemed it would end, as initially announced, by the 30th of June.
Yardney says a concern with that possibility, or even if the boost is extended for a short while after, is that after it ends the demand from new buyers will have been exhausted.
Harris says the government incentives have had an impact across the country, but he didn't think that the loss of the boost to first homebuyers would, or at least should be enough to turn away investment. Interest rates are still low and home prices have been stable in Victoria, he says. Overall affordability is still there.
"There is little doubt that results would have been substantially poorer without this incentive in place," says Harris of the boost. "However, I think it is a mistake to buy property merely because of the current incentives. There are so many things to consider, including the buyer's long term financial viability."
While certain areas of the state might be performing above others right now, Harris says investors should keep an open mind to look in less predictable locations as well.
"There is good value everywhere, if buyers do their research and keep an open mind," he says. "One of the biggest mistakes buyers make is closing their options up before the search has even begun."
Investors need not just look in Melbourne, says Harris.
Rural areas such as Bendigo, Shepparton, Mildura, Wodonga and Warrnambool are still experiencing strong demand as well.
He says LJ Hooker's Torquay office had people camp out for several nights for a land release in March. Half of the blocks of the estate sold within weeks of being on the market.
Within Melbourne itself, smaller units in good locations with less supply have been presenting good value, lately, says Monique Wakelin, of the Wakelin Property Advisory.
"We've got so many single households and so many on a tight budget," she says. "One bedroom apartments are great investments because of the demographic change we've been under."
Yardney says younger residents have also been preferring city life in Melbourne to the outer suburbs.
"They don't want to live how their parents did in the outer suburbs," he says. "They want to live close to the city and where they work."
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