Melbourne’s real estate microcosm revealed discerning buyer behaviour this quarter. Escalating living costs, mortgage payments, and diminished borrowing power prompted a re-evaluation of buyer priorities. Which is no surprise, considering the nuances within the market over the past 3 years. In 2022, national home values declined 4.9% in a course correction following the extraordinary 24.5% surge of 2021. Despite interest rates tripling in the past 18 months, the 8.1% increase in national home values through 2023 appeared relatively resilient.
In the four weeks ending 17 December, the average final clearance rate was 58.9%. This was down from 62.5% at the end of November, though still higher than the 55.1% average recorded in the same period of 2022. The pace of capital growth also dropped, experiencing a gradual easement from June, and most notably through November.
Rate hikes through November notably impacted the market, with monthly and quarterly indices of -0.3% and -0.2% respectively. Both buyers and sellers tightly followed what will likely continue to be an unpredictable and volatile element, as (according to CoreLogic) more than 70% of real estate professionals expect interest rates to have the most significant influence on the housing market in 2024.
At the close of the quarter, Sydney values remained -2.1% below their January 2022 peak, while Melbourne values were -4.1% below their March 2022 peak. With the RBA forecasting a rise in unemployment, an indicator they closely monitor to track inflation, there is soft expectation of the market growing in the foreseeable future.
As is usual within the Inner West market, if a property offered scarcity and was priced well, the likelihood of a successful sale was high. If the agent quoted too high (expecting 2021 results) the property lingered on the market. Buyers needed to be cautious of sales quotes, as some were blindsided by exceeded quote ranges, selling $200k-$300k above top of the quote range. The below sales demonstrated the importance of being able to value a property proving critical in successful acquisition.
Region Roundup
- Moonee Valley
- Merri-Bek
Looking Ahead
As it currently stands, buyers are not keen to commit themselves to higher costs in order to secure a property. With the increase in cost of living and mortgagee repayments, the urgency of moving has certainly tapered off. Buyers will only move for the right home at the right price. This tentative stance will likely deepen with the considerable potential for a decline in interest rates mid-2024, begging the question; Could home values surpass the projected 3% increase? This speculation gains complexity when factoring in Melbourne’s comparatively softer growth rates over the last 12 months, adding an intriguing layer to the evolving market dynamics.
Rentals look set to become a sector of interest in the coming year, as James Pilliner from Nelson Alexander said, “We have seen many Rental Providers put their properties to market in early 2024, combatting the lack of rental property available and producing a generous amount of new listings for buyers to secure. The increased stock should be very beneficial to the sales market as we can finally offer good choice to buyers, and it should give the market some buoyancy for at least the first half of 2024”.
Looking further ahead, the property demand landscape is pivoting towards units, anticipating higher growth in this dwelling category in the coming years. Buyers do not want to move further out to be able to buy a home, instead their criteria will move towards a unit or town house to ensure they are still living in a desired location.
For 2024, the sentiment within the Inner North real estate market is on a marked incline. Elevated buyer confidence has been observed as this year kicked off with good numbers at inspections. Jesse Dolcetta from Barry Plant Real Estate summed up by saying, “The pivotal factor of positivity stems from the decline in inflation, coupled with the likelihood of sustained interest rate holds and the anticipation of potential rate reductions later in the year. This collective sentiment leads me to believe that the real estate market in 2024 is gearing up to be a positive one”.
Get in touch with Nuno & Kelly to find out more about the Inner North/West market, or make an appointment to discuss your requirements and see how we can help you get into your ideal home sooner.
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