Property market update with Ray White
By Andrew Salvo - Ray White Southbank
There has been plenty of commentary in the media regarding rate changes and the impacts on the property market.
Many of our clients have been asking what these changes mean for their property and the inner-city market.
Our experience over the last three months has been quite positive, buyer activity has increased with many properties being sold with multiple offers on the table and auctions with a minimum of two bidders delivering a clearance rate of 75 per cent.
Why are we experiencing this activity?
Melbourne rentals have experienced the fastest increase over the last several years. Many investors sold out during the COVID-19 pandemic, which reduced stock dramatically.
As Australia reopened its borders and Melbourne came out of lockdown, we have seen a surge of interstate/international migration (including international student arrivals), putting even more pressure on the rental market.
Our office unit rentals have jumped 37 per cent over the year from the lows during COVID-19, reaching up to an average of $530 a week. That equates to a jump of $155 per week since September 2021. Rents are now above pre-COVID levels and still on the rise.
Buyer motivation and sentiment
With rents increasing, it is still making more sense to buy, evidenced by the sheer number of first home buyers and inner-city residents we are meeting who were previously renting in the area and now opting to purchase their own home.
Analysts continue to report that more investors are entering the market again, because rents are on the rise supporting the investment income.
Rising interest rates are reducing the loan sizes, resulting in a lowered borrowing capacity for many buyers.
This shift is pushing buyers to more affordable suburb in the inner-city.
With the dust of the federal election now settled and buyers coming to terms with interest rate rises, there is more certainty in the economy and buyer confidence to make decisions.
What does this activity mean for property values?
To assess this properly it is best to compare the activity in inner-city today to the same period in 2021 (historically low interest rates, albeit Melbourne was in lock down from 5 August to October 2021) and 2019 (a pre-COVID-19 pandemic market and home loan rates were at a similar level to what’s on offer today).
The closure of our borders and general disruption caused by the pandemic and Melbourne lockdowns had a bigger impact of property prices in City of Melbourne than the increase of interest rates.
City of Melbourne has clearly rebounded to where it left off.
What should sellers do?
With buyers demonstrating confidence in the current market, sellers should be doing the same, knowing that prices and activity is back to where it was pre the COVID-19 pandemic.
The properties performing best in the market are those which are ready to move in, with no renovation/maintenance required. With the current surge in renovating and materials costs, most buyers are looking for a turnkey solution right from settlement day.
For more information: raywhitesouthbank.com.au •
Caption: Ray White Southbank Team.