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Property Market update:
Unmasked! Stage 4 will be over soon!
Since our last newsletter, Victoria has moved to even stronger restrictions under Stage 4. This is far more restrictive on the real estate sector than has previously been the case. Private inspections have now ceased, so anyone looking to purchase a property they have not viewed prior to the lockdown, would need to buy “sight unseen”. This is fraught with danger and we felt it was necessary to focus on this in our tip of the month at the end of this newsletter to warn people of the potential pitfalls.
In terms of what is happening on the ground, the agents are telling us that they are still receiving a lot of enquiries from potential buyers for the stock that is listed. This is not surprising as prior to this lock down our phones were starting to ring again with new enquiries and previous clients assessing buying opportunities. There are also the frustrated buyers that have been in the market for most of the year that have found it difficult to buy due to the low stock levels. This pent up demand, coupled with low levels of supply is supporting stable prices.
What will be interesting to watch when we do come out of Stage 4 restrictions is what happens on the supply side of the equation. With unemployment continuing to rise and the prospect of jobkeeper reducing and eventually being phased out we can only expect this number to rise. Coupled with the removal of mortgage deferrals and the level of government support there is going to be increased pressure on some people to sell their investments or homes. So at some point you would expect there to be greater pressure on prices.
Having said that, one thing I have learned over the years is that you can never predict the direction of the market with great accuracy. People always need to find a place for their money and property will continue to be a strong asset class. So if you are employed, have the funds, and have done your due diligence, now can also be a good time to buy.
In this months newsletter I have also provided a bit more information on the economic impacts of COVID-19 and how this impacts property.
Stay well!
Leigh McConnon
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Economic outlook
It is worth starting this discussion on the predictions that were made in February and March when the pandemic first hit. There were some dire numbers of 30% and even 40% drops in house prices. This simply has not happened and while there have been some drops in certain suburbs, price points and property types, the drops have been modest in most cases and in certain instances we have seen some price increases.
However, the Melbourne property market has taken a more significant hit from the onset of COVID-19, and the new round of restrictions will test levels of transaction activity. Property values have seen a cumulative decline of -3.5% since March (Corelogic). It is worth noting that the majority of this decline has been felt in the higher price brackets above the 75th percentile, while the lower price points have held up reasonably well. These numbers do tell us though that vendors are becoming more cautious about selling, and prospective buyers may wait to commit to property purchases. This is reflected in the CoreLogic Early Market Indicators for Victoria, where pre-listings activity is down 11.8% over the month, and new listings of property for sale fell 5.4% in July. You can expect the drops to be even more dramatic for August.
Looking more specifically at Buyer demand, there can be no doubting this will decrease as a result of falls in consumer confidence, the increase in unemployment and the reduction in migration.
Consumer confidence in Australia has plunged almost to the depths seen in April 2020 when the nation entered the first lockdown. Interestingly the pessimism in NSW outstripped coronavirus-stricken Victoria. The Westpac-Melbourne Institute Index of Consumer Sentiment fell to 79.5 this month, from 87.9 in July and not far the extreme low of 75.6 seen four months ago. In NSW sentiment decreased by 15.5 per cent to 77.8, eclipsing Victoria’s 8.3 per cent fall to 78.
The ‘time to buy a dwelling’ index declined 4.3%, reversing all of the 4.1% gain seen in July. At 107.3, the index is well below its long run average of 119 but, unlike the Consumer Sentiment Index, still comfortably above April’s 82.1.
Consumer expectations for house prices deteriorated sharply in August. The Westpac-Melbourne Institute House Price Expectations Index dropped 16.2%, wiping out all the gains seen in June and July. At 76.3, the index is back in deeply pessimistic territory, only marginally above the 69.7 low in April and down 42% on a year ago.
What this tells us is that people still believe it is a good time to buy but only based on their views that the market will drop in price which we are yet to experience to significant degree.
A better than expected surge in jobs of 115,000 in July before the second Victorian lockdowns could see Australia avoid the Reserve Bank and Treasury forecasts of 10 per cent unemployment by the end of the year. Unemployment rose to 7.5 per cent in July – the highest since November 1998 – but up only marginally from 7.4 per cent in June. While more than 1 million people are now unemployed for the first time, economists say the stronger jobs recovery could mean Victoria's stage three and four lockdowns might not be as damaging as first thought. However you slice it though it is still a large number of people unemployed which will certainly swell once the government stimulus programs are removed.
In terms of overseas migration the borders will remain closed for some time, however I found it interesting that the government have agreed to pilot the first load of 300 overseas students into Adelaide in September. This is much earlier than anticipated and shows the desire to get this going again. But one thing is for certain we are not going to see anywhere near the numbers of migration pre COVID-19 in Victoria for some years. This will have a longer term impact on demand.
One factor that is likely to contribute some buoyancy to the market is the low interest rate environment. The level of competition has ramped up in the last few months and we are now seeing rates in the low 2%’s. For those that have money to invest or to buy a home, it has never been cheaper to do so from a holding cost perspective. With rates likely to be hold for several years this creates some certainty.
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Property Management update
Lockdown 2, stage 4 restrictions have seen a whole new level of challenge for Property Managers. With the current restrictions in place, we have had to shuffle and sort the way we manage our leasing and maintenance processes amongst others.
We continue to assist and manage any requests from our valued clients who are experiencing financial stress, leasing enquiries and maintenance issues.
Our vacancy rates are well below the market average and we have been able to maintain strong rental prices at this time, while still supporting our tenants.
Our team are working remotely leaving no stone unturned, it is “business as usual” for us, having put into practice alternative ways to manage the challenging changes we are experiencing.
We pride ourselves on creating an unsurpassed Property Management experience for all clients. If Covid-19 has left you questioning what it is that your Property Manager does, please feel free to contact Lily on 0437 232 529 or Rachel on 0477 663 325 for a confidential chat. We welcome your enquiry.
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Our Vendor Advocacy Services
Did you know we offer Vendor Advocacy?
A service within our broad range of offerings is Vendor Advocacy. We can assist clients in taking the time, stress and pressure out of selling a home or investment property, delivering focused experience and expertise in all aspects of a property sales transaction.
We are able to provide an independent valuation of your property. Our Advocates are experienced advisers who will guide you objectively through the sales process.
Our role as a Vendor Advocate is to act for the seller, to appoint a suitably qualified real estate agent. This ensures at all times that selling agents do what they say they will do, charge a fair and reasonable fee for their services, act impartially when introducing buyers and market and promote your property professionally and effectively.
Our fee is deducted from the sales commission, so it won’t cost you anymore to engage our service to assist you to sell your property.
Let us help you sell your property. Contact one of our experienced Buyer’s Advocates on (03) 9818 4499, for an obligation free discussion.
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Welcome to Martine Chauvin's clients and contacts
Buyers Advocate extended our welcome to Martine Chauvin last month but we thought we would also say welcome to any contacts that we have recently added to our newsletter subscription list. We hope that you enjoy being part of the Buyers Advocate family and find these newsletters informative and helpful.
Feel free to drop us a line and provide any feedback on how we can improve these communications and better meet your needs.
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Tip of the month: Take care with sight unseen purchases
In our discussions with agents we often hear them proudly boast of the number of sales they have transacted in lock down with buyers who have bought “sight unseen”. This is of real concern to us as this is a very risky way to buy property. Yes, it is possible and there are some good photos available or an on-line inspection video, however you can not rely on these. A selling agent is not going to show you any “issues” the property may have, particularly if it is going to impact the sale price. Similarly, a vendor can choose what to show you or cover up something that should be seen.
Also there are many factors that a virtual inspections will not show you, such as;
- What the streetscape is like? The street could be littered with cars all parked on the nature strips
- How many developments are going on in the street? A street full of apartment blocks is not going to be ideal if you want a quiet street
- What are the neighbouring properties like? This property may look great but the rest of the street may be full of dilapidated homes
- What is the property close too? And how does this impact the enjoyment of the property? Could be a mobile phone tower in front of the house or a bus stop
- Do the size of rooms, garage, storage really suit your requirements? Wide angle lenses can give an incredible view of size
- What is the aspect from the windows in the house? Could be looking directly onto another building
- What can you smell in and outside the house? And what does this indicate to you? Rising damp can often give off a stale smell or it could be impacted by the local paper mill
- What can you hear from the house? Noise from transport, main roads or businesses with the precinct could gave a detrimental effect on the property
- Do any appliances or features look outdated? The cabinets might’ve looked brand new because of a fresh coat of paint, but could be in very poor condition underneath
- What is the condition of the house? – often photos or videos conceal the true state of the property
- Is there pools of water lying under the house? Is re-stumping required?
- What is the privacy like? A neighbour could be looking directly into your living spaces
Interestingly for most home buyers they only have an ambiguous idea of what they’re really looking for, instead relying on that instinctual feeling when they walk into a home – that gut reaction that tells them, “This is the home for me.” Unfortunately, for those virtually shopping, this isn’t an option.
There is also a misconception amongst many buyers that if there is any issues with the property that they can raise this at the final inspection. This is not the case as the only legal requirement at a final inspection, is that the property be in the same condition as it was, when you first you inspected it. If you have not inspected the property the vendor could claim that it was in the same condition at the time it was sold. So to avoid these issues you really need to inspect the property yourself.
If you are planning to buy sight unseen, at a minimum you should have a building and pest inspection done. But remember this will only highlight the positive and negative attributes of the property and will not address all the questions above. You could also consider enlisting the services of a Buyers Advocate to utilise the latest tools to minimise any uncertainties/discrepancies and at a minimum ask the right questions so that you are not left exposed. We would always recommend a physical property inspection where circumstances permit.
If you need any assistance at all at the moment, please give us a call.
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Our Office
To support the government’s efforts to flatten the COVID-19 curve, Buyer's Advocate is currently closed.
All of our staff are operating from home and are always available to take your call, or Zoom if you prefer, so if you need to contact us at all just call the number below. We are here to help!
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