Melbourne Inner North - Winter 2023 Market Update

As the Winter of 2023 unfolded in Melbourne’s inner northern suburbs, the property market experienced unexpectedly buoyant dynamics. The predicted short-term fallout after 12 interest rate hikes, with price growth constraints and significantly impacted buyer and seller sentiment, calmed as the overall economic performance nationwide showed strong movement toward recovery. Consumer confidence rose, prompting increased activity in the real estate sector. The region’s reputation for cultural diversity, excellent amenities, and proximity to the CBD kept demand robust. However, the supply of properties was moderate, with new listings balancing the market somewhat, creating a favourable environment for sellers looking to achieve strong results on their properties. This has been a consistent trend all year and will continue into Spring.

This supply versus demand dynamic saw national auction clearance results in Winter hover above 70%, whereas last winter Melbourne clearance rates sat at 60%. Australian housing values moved through a fourth month of recovery with CoreLogic’s national Home Value Index rising 1.1% in June, decelerating slightly from the 1.2% gain recorded in May. The latest auction results continue to support the prospect of rising confidence and activity through 2023.

While building costs were still a major deterrent to buyers, data was showing signs that these costs are easing, having reduced by 10% from last June. If this drop continues it will likely encourage buyers to shift their interest back to purchasing homes that need work, creating sales opportunities for properties that previously lingered on the market.

Unemployment sat low at 3.6%, and wage growth was on a historically unseen swift upward trajectory. Still, only a small portion of households are sensitive to interest rate increases. Higher interest rates only put downward pressure on home values, due to buyer borrowing capacity being reduced.

For over a year, buyer sentiment has been one of concern; keen to buy but waiting to see how the interest rate rises impacted the market. If the last few months are anything to go by, this increased pent-up demand will make this Spring a very competitive market. With this ‘Wait and See’ trend now behind us, and the peak of the market near, the signs are there that the public is busily preparing their finances ready to enter the Spring market with conviction. The question remains, will the supply increase to match the rising demand this Spring?

 

Region Roundup

Looking Ahead

Stock levels have been relatively constrained during winter 2023, with a limited number of available properties for sale. This scarcity has contributed to the competitive nature of the market and increased buyer interest in securing properties. The sales forecast for the remainder of the year remains positive. As the economy continues to improve and demand persists, it is likely that property prices will continue to see steady growth. However, as supply adjusts to meet demand, the market may find a more balanced footing.

The latest auction results continue to support the prospect of rising confidence and activity through 2023. The supply/demand issue was a direct reflection of the recent underbuilding and resumption of migration, though the housing market has rebounded significantly sooner than most predicted.

The outlook on inflation remains clouded – will interest rates peak lower and earlier than estimated? Whilst we still have a booming national economy, one can think that the City of Yarra, Darebin, Banyule, and Merri-Bek are well-positioned to absorb higher rates. Not so much the case for investors, as recent government tax changes and increased interest rates are making it cost-prohibitive to hold onto assets. Not a great situation for renters, when rents have increased over 16.7% and 33% in Melbourne homes and units respectively. Less rental properties in the market will only further increase costs.

As we approach the Spring market, buyers can equip themselves to succeed by being well-prepared. Buyers looking to gain an edge in the spring market can do so by taking a few strategic steps; getting pre-approval of finances, engaging the services of a knowledgeable and experienced buyers agent with access to off-market opportunities, being willing to act swiftly when a desirable property becomes available, and offering flexibility on the settlement date for sellers who might need a faster or more extended settlement period. All signs point to a promising remainder of the year for the property market.