These past six months saw substantial changes sweep through the property market in Melbourne’s Inner North/North East and Inner West. Prior to Christmas, it was certainly a seller’s market, with 4-5 bidders at every auction and a clearance rate of 80-85%. Record sales were being achieved, heading in excess of 10% above quoted ranges, as inadequate stock levels for the excessive buyer demand drove up competition and inflated prices beyond their true value.
As the growth trend in Melbourne housing values leveled out over the past three months, we entered a transitional market. The contrasting conditions compared to last year became clear as a fall in open for inspection attendance and bidders at auction were indicative of the caution blanketing buyers approach. Many of the active buyers of last year purchased throughout the frenzy of the bull market, add this to an influx of properties increasing buyers choices, and there was less demand and urgency to buy this quarter. The FOMO of last years market was no longer present. A number of other variables came into play that adversely affected buyer incentive, such as the upcoming election and the threat of rising interest rates. Bidders dropped to 2-3 per auction, and clearance rates diminished to around 75%. Vendors had to be more realistic with their price expectations to entice buyers and run successful campaigns.
Renovated houses held their value, as the rise of building costs stopped buyers from being as bullish in securing properties needing renovation. These properties failed to make sense in the current market when what they had factored in as costing $300,000 to renovate soon turned into a $400-$450,000 overhead. Buyers began to pivot toward fully renovated homes to remove the headaches and skyrocketing costs of renovating. Therefore, fully renovated homes performed extremely well and remained in line with the previous quarter’s results.
- Inner North
- Inner North East
- Inner West
The next quarter will continue to develop into a balanced market with strong results for fully renovated homes. With a likely continuation of high material and labour prices, family homes that require no extra work will still perform well across the board. The market one level down, being unrenovated or older renovations, will have a more balanced result. Damian Ponte from Nelson Alexander Real Estate in Moreland/Yarra stated, “Vendors may have to be more realistic with their price expectations but I don’t think the buyers hold all the cards, as properties are still selling. I see it as a level playing field”. The desire to live close to the city will always be there, so buyers will still compete for properties in the inner north and inner west, though the market will become more balanced. The biggest variable will be consumer confidence, as interest rates, the Ukraine war, a possible change in government, and job losses, all of which can affect the market, but at this stage this property market should stay steady all the way to Spring.
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