In May this year, one month into the first Melbourne lockdown, the predictions for the property market were dire. A Commonwealth Bank forecast stated that the house prices would plummet by up to 32 percent as a result of the COVID-19 pandemic. While concerns remain about the damage done to the economy, the performance of the residential property market has confounded the doomsayers.
The Melbourne estate agents that Neos Kosmos interviewed in May were far more upbeat about the prospects for housing property sales and prices. Four months down the line, they have been proved right despite the difficulties that Stage 4 lockdown measures have posed for them.
The Corelogic Value Index as at 31 August shows the Australian residential property market is holding steady despite COVID-19 restrictions and fears. The index which shows the change in dwelling values for Melbourne house prices to have fallen 3.5 percent over the last quarter while the total return is still +9.5percent, making it the fourth-best performer among the nation’s state capitals. Sydney is highest at +12.9 percent followed by Canberra (+12 percent), Hobart (+11 percent). The combined capitals’ median price is +9.8 percent, so Melbourne falls just short of the national average.
However, in terms of median value for the capitals, Melbourne, at $667,520, is second only to Sydney which tops the list at $860,182 – the combined national median is $633,745. The median price is the midway point of all the houses/units sold at market value over a set period.
Neos Kosmos has embarked on an odyssey around Australia to speak to estate agents in the state capitals and gauge the views on the performance of the residential property market in their respective cities and what the future holds for them.
READ MORE: Real estate agents say property prices are staying steady despite estimates for 30 per cent slash
Peter Konidaris of O’Brien Real Estate in Keysborough and servicing the Greater Dandenong and Cheltenham areas:
The main problem for Melbourne estate agents was the severity of the Stage Four lockdown which prevented customers from visiting properties they are interested in.
The truth is all new properties cannot be physically inspected because of COVID-19 lockdown measures in Melbourne. The quantity of stock (for sale) is very low in numbers so the median is from a low source.
As soon as restrictions are eased, there will be a lot of activity – the statistics are easily distorted right now because of the restrictions. Right now, we can’t even get photographers to the properties (to take pictures for the websites) nor can the properties be inspected. Only licensed building and pest inspectors can visit a property under current lockdown conditions. We just cannot do our job.
With no visits allowed, we have been sending what information we can (to interested buyers), such as the floor plan of a building, and virtual walk-throughs but that does not convey everything and buyers like to visit the property for themselves.
Real Estate.com statistics show that there have been a few sales this way but the volume of traffic to the website is consistent with the numbers of four to five months ago. The buyers are circling to buy.
Right now, is not necessarily a buyers’ market because the sellers just cannot show their properties. There is always a need to buy property and it is inevitable all properties will sell.
There is concern over unemployment figures being high but unemployment is not as big a factor in my area.
Angela Limanis is the sales consultant for Ray White Cheltenham, Melbourne:
I am seeing a slight drop of between two and five per cent which is not such a big drop given home prices were up 15 percent in the last quarter of 2019 – after the election last year and a royal commission (Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, prices went up. The last price rise was in March this year, so a 5 percent decline is not such a drop.
A lot of buyers have held back because they thought there will be a lot of bargains out there.
Last week (despite Stage 4 lockdown), we sold two properties sight unseen and no special conditions attached to the sale other than the normal subject to finance availability and after building and pest inspection.
Stock levels are low and will stay low until lockdown is lifted. We have had a lot of inquiries and once the restrictions are lifted, the homebuyers will be very active.
There are also opportunities for the experienced property investor who will be more confident in taking advantage of the current situation. The most recent property that we sold was to an investor.
We have a number of homes to launch once restrictions go. The next few months after that will be steady but there will be a dip in the first quarter of next year once JobKeeper and other relief packages are lifted.
It will be difficult to say what will happen from March onwards and there may be a large number of forced house sales.
Denny Darras is a director of Darras and Zervas Estate Agents based in Clayton and covering Oakleigh, Springvale (Melbourne). He is in charge of rentals:
The Stage 4 lockdown measures have paralysed the industry in Melbourne.
In first lockdown, the restrictions allowed for viewings to take place one person at a time and with 15-minute intervals which allowed agent to sanitise the place in time for next inspection. This allowed for people to safely view the properties.
Now the estate agents are restricted to properties within a 5km radius. We often leave the curtains of properties open so people can get a look of the rooms inside.
Sales are suffering because most people like to get a feel of the property. Ninety per cent of people will not buy without first seeing the property.
There will be a quick turnaround in sales and rentals once the restrictions are lifted.
I have never had so many properties to rent at any one time. If the measures are only relaxed to what they were in the first lockdown, there will be an increase in properties rented.
Graeme Paizis, is the project sales manager for Ingenia Lifestyle Parkside (Ballarat, Regional Victoria) – a large 250-unit project for over 55s that is set to begin building in October. Mr Paizis has over 30 years’ experience in the Ballarat property market:
Property sales have remained buoyant despite the COVID-19 lockdown. The average time that a house is on the market is just 30 days.
From what I am seeing estate agents are working flat out. There are not enough homes available on the market to meet demand here. Everyone wants to be here, especially in the Buninyong area.
Much of the interest is driven from Melbourne buyers because the properties are cheap and they are throwing a lot of (extra) money just to secure the sale.
Melbourne is very expensive. People can sell there to buy a home in Ballarat that is half the price and twice as good as what you would get in Melbourne.
The other advantages that are drawing buyers to the regional city are its close proximity to Melbourne, and has very good schools and medical facilities. There is also the fact that Ballarat and Regional Victoria did not face the same hard lockdown measures as Melbourne.
East Geelong and Bendigo are also proving popular for property buyers.
Con Georgiadis of First National Piermont, in Sydney (near Darling Harbour):
There is uncertainty at present. Rents are down because of no international students and tourists – people have gone back to their families (overseas). Most tenants now are on discounts just to stay on the properties.
In the expensive markets, properties have gone for good money but the bulk-market prices have dropped by 20 percent. For example, earlier this year an unrenovated house next to a client’s renovated property went for $1.5 million early this year. My client took $200,000 off the price to sell their renovated property recently for $1.3million.
Buyer confidence is low and there are concerns over unemployment.
When JobKeeper goes there will be a real bloodbath.
Angelos Karalis of Karalis Real Estate Mount Gravatt, (10 km from the Brisbane CBD):
The area his agency works in is about 10km from the Brisbane in a middle to high-end area. It is an old suburb of younger owner-occupiers who are buying and renovating properties.
Brisbane’s experience of lockdown was a lot milder than Melbourne. There was a lockdown period between March and April sales were affected in a big way as some clients were too scared to sell because they were faced either with job loss or reduced working hours.
We are finding fewer properties are available on the market which is why the prices have been steady.
Depending on the individual’s financial situation, it is hard to get a loan to buy at present.
We are still getting inquiries for owner occupiers and investors but there is a lack of supply of properties to sell.
What happens next depends on whether JobSeeker and JobKeeker are extended and whether the banks will maintain the mortgage holiday for longer.
Foreign property buyers were not as big a factor in the property market as they were up to 2016 when an increase in Stamp duty was imposed and more restrictions on buying have been put in place since the COVID-19 outbreak. Local buyers are still buying and they now have a better chance than before to get something.
Christos Kazonis of Drakos Real Estates in Brisbane:
COVID-19 has had an effect on the market but it has not been as bad as was predicted. The reporting earlier this year on the state of the property market has been a joke. Brisbane has never been more buoyant.
I had a long-term contract on property that was supposed to have been completed for $1.46 million (but it fell through). Earlier this month, over three days, we had 25 enquiries (on the property): two offers were for $1.6million, one for 1.7 million but it was signed and settled for $1.75 million.
More people are wanting to own homes. JobKeeper has helped and I cannot keep up with demand. Auctions are going well and sales are very good.
Rentals in shops are low because of COVID-19 but they are recovering. There are problems too because the ships are not allowed in so that there are no tourists to rent through Airbnb. Getting financing (from the banks) takes a bit longer, 21 to 28 days, when it was just two to three weeks before.
Spiros “Jeff” Konstantinou of the builder and developer company Konstantinou Group in Mitchell, Canberra:
The ACT (Australian Capital Territory) had fared better than other states during the pandemic.
There are people who are unsure about buying units in high-rise buildings because of COVID-19. But it is safer here than in places like Melbourne. Prices are holding and a lot of shops are doing more business than before.
A lot of houses are being built and are currently experiencing a three-to-four-week turnaround. Demand is good but not at a vey high level and the prices are holding.
I think in six to nine months’ time we will be on recovery mode as we will be out of the COVID-19 pandemic.
READ MORE: Economic prospects after ‘once-in-a-century’ coronavirus crisis are gloomy – but it’s not all doom
George Vrodos, Property Shop, Darwin:
While Darwin’s property market looks steady under the current situation, (+1 percent in dwelling values over last quarter) Darwin was hit by a 30 percent downturn five years ago when work on the multi-billion Gas plant was completed. This meant many workers on the project left Darwin resulting in large vacancy rate with a large number of houses suddenly entering the market.
COVID-19 has caused minimal disruption as many people have adjusted to working from home. The hospitality industry has been the most affected. But inspections by appointment have been allowed and there has been some inter-state activity over the last few months.
Under current social-distancing conditions restaurants are allowed to operate at 60 percent capacity.
Darwin has seen a lot of spending from defence and federal government. A lot of mining projects are coming up over the next few months and Darwin will be the place to be over the next two years.
James Limnios heads the Limnios Property Group in Perth. Western Australia has managed to steer a calmer route through the COVID-19 storm but the state was in as much turmoil as the rest of the country when COVID-19 made landafall in March:
The pandemic was unprecedented not even during the Spanish flu outbreak (a century ago) were such measures taken.
We were very concerned. The Perth CBD shut down, businesses closed. It was very daunting and many panicked, we kept on working harder and have been able come out alright.
However, because of the pandemic we have 1.5 million Australian expats living around the world who want to come home. As a result, we have a flood of people returning to Western Australia with US dollars and pounds Sterling to buy property.
“We are receiving a lot of inquiries for desirable properties and it has all turned out very differently to what we predicted.
“We also did not anticipate a big internal demand for housing. There are people with money in their 60s and older who have realised they cannot travel because of current restrictions, so they are looking to buy properties in popular holiday destinations in the south west (of Perth). They would rather be safe and secure.
Mining is the centre of the Western Australian economy and prices for iron have been good and demand has resumed. Mining giant Rio Tinto had announced that employees need to be resident in Western Australia to work for them and this will increase demand of housing in the state.
Neos Kosmos was unable to obtain comment from estate agents in Adelaide and Hobart.
Stephen Koukoulas, Managing Director of Market Economics, former chief economist of CitiBank and former economic adviser to Australia’s Prime Minister Julia Gillard:
I have been pleasantly surprised at how the property market has performed. It is encouraging but it is not yet over.
People are waiting for things to turn over. This recession is not over yet. Things to consider include the phasing out of “mortgage holidays” by the banks, as well as of JobKeeper and other federal and state programs to counter the effects of the pandemic are factors. Another consideration is the job situation.
CoreLogic shows that prices peaked in April ant that was just five months ago. There are still is 12 to 18 months to go, and this could mean a tractoring down of prices rather than a sudden drop.
The stock markets have been very volatile and with the US elections looming we can expect more volatility.
Buying property may be a good investment provided you put in a good deposit and are planning to hold on to the property on a long-term (10 years or more) basis. The prices are lowering, interest rates are low so maybe it is coming back to property (for a safe investment).
The situation is changing all the time.
READ MORE: Caution is the name of the game in post Covid-19 world, says economist