Property prices in Melbourne, are currently 5.3% higher than pre-covid times, a very statistic that no one predicted. The past 6 months have seen a huge surge in property prices all over the country. It seems that despite a global pandemic, nothing can slow down the property market in Australia. We take a look at what has happened and what to expect. Whilst also examining the contributing factors towards the success and resilience of this market.
What’s been happening?
Following the lockdowns from last year, Melbourne has seen exorbitant property growth. In fact, the past three months have seen a 5.5% growth. In addition to this, for the first time, the median house price is over $1,000,000. Buyers are back and there is a strong presence of FOMO (fear of missing out) that is driving these prices. There is also a lack of supply that is contributing to this high level of competition.
What has led to the growth?
Many people have been wondering where, how, and why this growth in the market has occurred. There are many contributing factors starting with the record low-interest rates that occurred during the pandemic. Secondly, elevated savings of Australian residents, which occurred as a direct response to nationwide lockdowns. Thirdly, there has been an upward trend in consumer confidence and spending, which reached a 10 year high in April. Lastly, various government grants and incentives, which were devised to encourage consumers to purchase, such as 50% off stamp duty and the Homebuilder scheme helped to reinvigorate the industry.
There has been a constant expectation, amongst the naysayers, that the Australian property market will again slow down, as these levels of growth are ‘unsustainable’. Many economists have been warning that the eventual rise in interest rates will be the determining factor for this change. However, the RBA has yet again announced that interest rates and the official cash rate will remain at 0.1%. This was unexpected as current economic activity and retail spending are above pre covid levels. In addition to this, Australia’s unemployment rate and underemployment rates are below the decade average. So, why did the RBA determine that these rates remain so low? One of the main factors is due to inflation rates, which aren’t expected to rise until; late 2024.
The effect of lockdowns
There’s no denying that lockdowns have had a direct effect on the property market. From the inability to inspect properties, to holding online auctions, to being restricted in physical movements it’s all been quite hard. This is why there was such a downturn in the property market during 2020. Now that we seem to be at the tail end of the virus, we are seeing substantial growth, in fact, the largest in 30 years. However, the latest round of lockdowns, seen nationally, are showing their effects on the market. Of the 2,960 auctions last week in Australia, half of these (1,418) held in Melbourne. Which experienced a clearance rate of 74.4%, the highest by 5.6% than the past four weeks.
The return of the investors
In recent months there has been a surge in investor interest, with credit growth rising over April and May. Investor lending has grown by 70% over the past 6 months. In the month of May, investor loans surpassed first home buyers by $300,000. Why has this occurred? Well, as the property market started to boom investors started realising that there is some serious money to be made. With Melbourne experiencing a three-month growth rate of 5.5%.
Well, unfortunately, we don’t have a crystal ball, but can confidently say that the market will stay hot and continue to rise with the resurgence of investors, as this will add further competition. Secondly, with interest rates remaining low, people’s propensity to secure loans will remain high and secure, further adding to the property market competition. If wages do not rise and interest rates begin to rise, the property market will start to stagnate. However, like most things, this sector is highly unpredictable and heavily determinant on supply and demand, which help to determine the prices and competition.
If you are wanting to purchase or enter the property market don’t be deterred by the current market conditions. A secure way to enter is to purchase an affordable off-the-plan property. At Cornus Developments, we have a number of apartments available. With developments in Oakleigh, Carnegie, Malvern East, and Burwood starting from prices as low as $459,000. We have a strong, reliable, and credible track record and are completely transparent with our residents.
Call 1800 267 687 or fill in the form below and a sales team representative will contact you.
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