Far from the price collapse predicted 12 months ago, our property market is currently showing extraordinary strength. Whilst Melbourne is still behind the national averages, due to our prolonged lock-downs and business disruption, we are recovering quickly. Price growth was 2.1% in February alone and is now just 1.3% below values of one year ago.
So, in Melbourne’s eastern suburbs, we dropped about 6-7% (our prediction was a potential 10% fall) and has now almost entirely recovered. It has been a fairly dramatic 4 years, with the market peak still being late 2017, followed by a drop of about 25%, but this record will likely be taken out in the next couple of months. Regional Victoria is powering ahead and is already at record levels. And all amid a worldwide pandemic. Quite stunning really.
First home buyers made up close to half of all new loans last month, with all new lending up 39% on one year ago. As usually happens in this part of the property cycle, investors are re-entering the market quickly but still only make up about 10%. The brief affordability window for first home buyers is rapidly closing.
We are now just weeks away from the end of JobKeeper support and a number of stamp duty incentives in place in Victoria finish in June, so there will be yet more changes to the various influences on prices. The biggest factor is still the lack of stock for sale. Yes, interest rates are a major factor but the increasing demand, and still limited supply, is the main current driver.
Our expectation is for the price bounce to continue strongly for the next three months and then to fade to a more subdued growth in the second half of the year. This should coincide with an increasing number of properties for sale. If we have learned anything in the last few years though, it is that things can change quickly. So, the next Black Swan event (or even just the predictable events like increasing Covid-19 variants, with occasional community infections) could disrupt the orderly world we think we are starting to see ahead of us.
Statistical Source: CoreLogic Report dated 1st March 2021