The first wave of COVID-19 created uncertainty and anxiety in the Melbourne Metropolitan Market. As a result, many vendors readjusted their price expectations and encouraged offers before auctions to sell quickly. This dip in the market was short-lived as buyers and sellers regained confidence, became undeterred by economic conditions, and it became evident that demand for properties well-outweighed supply.
The market has stabilised over the past four months. However, some market segments such as high-end properties (above $2,500,000) and inner-city high rise apartments have seen a reduction in demand, and we expect values for some of these properties to have fallen.
Talking Points
At present, there is an oversupply of rental properties in the CBD fringe markets due to a lack of international students and a drop in tourism (Airbnb).
Property values are somewhat a moving target, but relatively stable in many markets, oversupplied markets are falling
First home buyers market, below $700,000 still active due to several government grants and exemptions
The quality or Bluechip properties are selling well, while Less desirable properties, poorly presented or poorly located properties which would typically take longer to sell in pre-COVID-19, are now either being withdrawn or more realistically priced
Oversupply of Rental Properties
Internal and domestic travel restrictions continue to inflict pain on the investment market. An example is 333 Exhibition Street, in Melbourne. The majority of apartments were leased to Mantra on a long term basis, with several five-year options. However, Mantra recently decided not to renew, effectively releasing some 140 properties into both the sale and rental market.
Areas near universities and other higher education spaces that once appealed to international students have suffered from a drop in demand; an oversupply further exacerbates this in Melbourne CBD and Docklands. Additionally, former Airbnb properties have begun to encroach on the long term lease market, further oversupplying the rental market.
When The Government Stimulus Stops!
The actual state of the market is difficult to determine due to multiple Government stimulus measures and a limited number of transactions occurring since March. As the inducement measures dry up over the coming months and the Melbourne Market moves into spring, which typically has higher stock levels, will the values remain stable?
Property prices in the Growth corridors of Melbourne are driven by population growth (migration and immigration). Victoria and Australia’s borders have effectively shut down, and this will affect demand in this market segment.
Will the state borders open up then? One thing is for sure; the Melburnians are looking forward to the end of Stage 4 Lockdown.
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