Our “Patchy” Property Market

This descriptor is used by agents a lot these days.

What they really mean is that we have an unusual Melbourne property market right now. The days of auction results consistently setting new price records, auction clearance rates in the heady 70’s and 80’s, and multiple bidders at almost every property are literally yesteryear.

Our market isn’t performing consistently though.

We find ourselves in a dual-speed market which can largely be attributed to our banks. The lenders have clamped down on borrowers since APRA’s intervention and the mess from the Banking Royal Commission has created a difficult scene for buyers who need finance.

Unsurprisingly not all borrowers are treated equal.

Banks aren’t just scrutinising investors these days. The heightened controls on lenders to document borrower’s personal expenditure in greater detail, concerns about the future of negative gearing and conservative buffers in place across the lender calculator’s of existing debt has tightened the borrowing capacity for all buyers, but in particular those who;

• have existing investment debt
• have personal debts such as credit cards and personal loans
• have fixed term interest only loans in place for other debts

First Home Buyers have been welcomed back into the market by our State Government’s stamp duty initiative, and combined with the fact that most first home buyers don’t have existing debts (or if they do, the debts aren’t of the same magnitude of an investor’s or multi-property portfolio holder’s).

The other contingent who are less impacted and sometimes immune to lending restrictions are the retirees and down-sizers who often pay cash for their property after the sale of their family home.

Given these two segments of the market are broadly in a more advantageous position now when it comes to buying, it is of little surprise that our market is quite split now.

Houses are passing in more frequently. Prices are being discounted. Values in quite a few areas have diminished visibly and compromised locations are punishing vendors with longer days on market and a much fussier pool of buyers. 

The $800,000+ price point is not exhibiting the growth and gusto that we witnessed last year.

However the $400,000-$750,000 segment of the market would have some of us believe that we’re still in a Seller’s market. When auction clearance rates are segmented, our market starts to look a lot more interesting.

First home buyers are gravitating in numbers to well-located established properties. Some of the bonus points they search for include;

• boutique, established blocks
• courtyard or great balcony on title
• shops and train within walking distance
• low Owner’s Corp fees

And Baby-Boomers, retirees and down-sizers are looking for all of the above, with a twist of;

• lock up garage
• small courtyard for plants
• single level with limited steps
• ‘lock and leave’

Not only do they often have lesser concern about paying the highest price, but they also have competition.

Our ageing population is a concern for us on many levels and the sheer number of cashed up buyers entering into this phase of life is outstripping supply by a huge differential.

Yesterday’s two auctions in both Yarraville and Reservoir didn’t sell under the hammer but after a pass-in to us. Both had competing bidders but clearly the bidding rigour did not match past years’ for the same types of properties.

This well-located and practical front townhouse sold to lovely investor clients of ours for a negotiated price $12,500 below the reserve.

Today on a crisp sunny Sunday this cute street-frontage, one-of-two single level townhouse in Keilor East sold for $782,000 to a committed daughter who was bidding aggressively for an older parent. Not only did the price eclipse expectations, but the number of older down-sizer bidders was counter to the market conditions we’ve been facing.

And this beautiful own-title new double storey cottage sold after negotiations also, but interestingly with two down-sizers showing interest due to the clever floor plan offering a master bedroom downstairs.

Our growing percentage of buyers who require ground floor bedroom and living is something that all buyers need to keep top of mind when considering their criteria or paving out a development or re-sale strategy.