2020 | The Buyers Are Here Again
Updated: Feb 4, 2020
It's 2020 and the property market has awakened once again however this time with very little choice on the market for would-be buyers and they are frustrated with the limited options. It's fair to say that there are still sellers out there that are unfamiliar with the recovery that Melbourne real estate market has been going through and this article will shed some light on the current status to help you plan your next move.
As you would be aware, in 2018 the market took a backwards step in terms of housing values and volume of transactions and many buyers adopted a wait-and-see approach. For some who took the plunge, they have already achieved considerable price growth and for the rest... THEY ARE STILL LOOKING!
And this is where we are now in January 2020, limited stock on the market and lots of buyers. The number of available properties is increasing each week however we feel that the demand from buyers currently outweighs the number of homes offered for sale. It is this supply/demand dynamic which typically leads to strong sale prices as the competition between buyers plays out at auctions and during private treaty negotiations.
A prospective seller recently asked me when I think the best time will be to sell their property and my reply was that the best time is when the supply is low and the demand is high. The dynamics present in the market right now offers those particular conditions yet many of those who want to transition out of their current property aren't taking the steps to get ready to capitalize on this moment in time.
Sellers of real estate need to A) feel confident they will be able to achieve their goal of selling and B) believe that they will be able to secure their next property. More and more are beginning to realise that the former will indeed be a smart move and the latter will become easier as we get further in to the first quarter of 2020.
The fact is that the lenders still have extremely low interest rates, the banks have eased their strict lending criteria since the Royal Commission and the rates are expected to decrease even further which is evidenced in the fixed rates being lower than the variable rates. Financial forecasters are of the opinion that we can expect low interest rates for the foreseeable future meaning those that get in before prices rise will have the opportunity to pay down their debt more quickly than those that wait.
The Melbourne real estate market has shown itself to be extremely resilient to the change we experienced in 2018 which was ultimately a brief hiatus and any losses have been rapidly recovered already since then. ANZ senior economist Felicity Emmett has made predictions of 12% price growth in 2020 in Melbourne. However in 2021, according to Ms Emmett, " While prices will continue to climb next year, the pace will slow to just 4 per cent nationally due to rising stock and low credit growth.
"We expect that the increase in new listings will help satisfy the pent up demand," she said. "I think eventually this will limit [price growth]. That's part of the reason why we think the pace of gains will moderate," Ms Emmett said.
"Income growth is also quite weak at the moment and people are much more conscious of becoming more indebted.
"Even though there are lots of people getting new mortgages and loan sizes are increasing, the rate of repayment is rising as people focus on paying down their debts at the moment."
Auction clearance rates have long been a signal of the strength of the real estate market and when 2019 concluded, the clearance rate was well into the 70%'s. That is to say that more than 7 out of 10 properties offered for auction sold either on the day or before. These results show that we are in a very well balanced market indeed and should instill confidence in those that intend to participate in 2020.
Simon Wendt is a Licensed Estate Agent and Auctioneer with over 20 years experience in residential sales of real estate. In 2012 he ranked number 62 in REB's top 100 agents list. Simon currently leads hockingstuart's sales team in the bayside suburb of Mentone and he and his team service the surrounding areas.
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