Our year in review

As the real estate year comes to a close, I circle in on the Victorian property market and ponder the highlights, lowlights, surprising trends and I ask myself what could be in store for our capital city and regional markets next year.

Melbourne, along with Sydney and Canberra had a challenging year with protracted lockdowns, but with a tougher dose due to the trading conditions and length of lockdowns. Unlike Sydney, both Melbourne and Canberra were plunged into complete shutdown when the state authorities deemed that no property inspections could take place for a period of time. Melbourne was still reeling after an extenuated lockdown in winter-spring for 2020, and sadly the 2021 lockdowns almost perfectly mirrored the date range from the year prior.

There was no doubt about it. We were a city in distress.

The property market threw out plenty of curve-balls, but we also experienced some anticipated changes.

The most surprising change was the sheer rate of capital growth, despite lockdown limitations and unemployment fears. I’ve highlighted dwelling growth in the CoreLogic chart below. Unsurprisingly, regional dwelling value growth exceeded our capital city’s, but I still find it incredible that despite our horrid lockdowns, Melbourne’s property market has exhibited double-digit growth.

We’ve had really tough headwinds, namely;

• Economic upset and unemployment for many sectors due to our long and consecutive lockdowns
• Zero international migration, (particularly compounding for our city given Melbourne welcomes the highest number of international migrants in the nation)
• A comparatively high number of interstate and regional migrants leaving our city

Another unanticipated change was the uptake of older listings; spurred on by a surge of buyer demand. As covered in the previous Sunday Blog, this CoreLogic chart highlights the uptake of low-hanging fruit superbly. Despite record high new listing numbers, total listings, (including old listings) are currently at record lows. Buyer hunger has had buyers turning to stock that had previously been sitting on the market for many months.

Whether the stock was previously undesirable or overpriced is unknown, but buyer desperation was certainly a hallmark of 2021.

Our regional market demand exploded throughout 2020; a combination of city dwellers escaping the city, (and the lockdowns), and buyers on the quest for better affordability. With many of our beautiful regions offering great schools, hospitals, employment and a lifestyle element, it’s not surprising that they have performed so well.

This segment of a CoreLogic chart highlights strong growth for both houses and units in our Victorian regions; perhaps surprising to some who have typically associated capital growth in regional markets with houses.

The growth of the regions has been amplified by the reduction in overall listings in the regions. Demand has soared, yet listing volumes have contracted.

It’s little wonder that the demand:supply ratio was so high.

Comparing listing volumes to our capital city illustrates an enormous disparity;

The most surprising element is that Melbourne’s capital growth was only slightly smaller than that of the regions for the past year.

Given the headwinds and the stock supply, most would have imagined Melbourne to underperform, yet it didn’t.

And while Melbourne didn’t win the award for most in-demand city during 2021, investors certainly opted back in. Clearly, Victoria trails all other states, however the net increase in investor activity for our state is worth noting.

With rental vacancies finally tightening up for our unit market, investors returning, regions boasting attractive lifestyles, (and employment), interest rates remaining low and international migration recommencing, things could be very interesting for Victoria in 2022.

With a record high disparity between houses and unit median price growth, the question is: will our capital city unit market spring back?

Only time will tell.

Wishing our wonderful clients, supporters and industry friends a safe and happy festive season, and a well-deserved break.