The COVID-19 pandemic has had an impact on Melbourne’s property market but the impact is not being felt evenly. Where sellers in Melbourne’s inner-city have started accepting price drops averaging 3.5% in the June Quarter, those selling in some of the more affordable areas of Melbourne are bucking that trend.
A major reason for this seems to be inner-city home owners, whose employment has been impacted by the crisis are unable to keep up payments on the larger mortgages they may have. Forced sales by those that have lost businesses are becoming increasingly common.
Industry reports show that the inner city experienced modest drops during the June Quarter. Price drops were an average of 3.5% across Metropolitan Melbourne. Inner city areas like South Yarra and Fitzroy were slightly harder hit with drops topping 3.9%.
The reason for this seems obvious. When house prices fall it’s usually the most expensive houses that drop first. Conversely, they also rise first and fastest when there is an upswing. Popular areas will always remain popular but many buyers often stretch themselves thin when looking to get into the market in these areas. More indebted households often face more pressure to sell during an economic downturn.
Many real estate professionals feel the market has held up well given the circumstances. JobKeeper payments combined with low interest rates and banks being prepared to negotiate on mortgage repayments in the short term mean that many are able to continue making their payments. Those forced to sell, and sell at a massive loss, are those who may have been decimated business owners.
Also, whilst the inner city has seen some losses, it’s worth noting that inner city prices are still higher than they were a year ago.
Further, where wider Metropolitan Melbourne has seen drops in average house prices, the west and north west is bucking the trend. Over the last quarter, prices have risen by 2.5 and 3.1% respectively. These areas have been strong performers over the last 12 months, even with the pandemic and associated recession.
New housing estates are performing strongly, and many are sticking their house on the market with the hope of taking advance of strong prices – knowing that there is a risk that we will see price falls over the next 12 months if the economy continues to perform poorly.
Many purchases in Melbourne’s west are looking to upgrade, or downsize, now whilst money is still available and whilst the market is still strong. Whilst rumours of price drops are obviously swirling across the west and north west, there are still plenty of buyers looking for affordable market entry and there is a limit of stock – meaning that it is still a sellers market in these areas.
The industry is still buoyant though. There will always be a need for quality housing in popular areas. The inner city has been well supported with infrastructure and will continue to be. State and Federal Governments are also offering incentives and guarantees to bring buyers into the market. Even if the next 12 months is rocky there’s still a positive mood in the real estate industry in the long-term.
Whether this positivity remains is to be seen. The industry awaits the reduction and removal of Federal Government stimulus packages that are currently in place and it remains to be seen what pressures and impacts this will have on Melbourne’s property market.