As the 2021 real estate year comes to an end, we reflect on the unique year we just had, the highs and lows, and the predictions that nearly everyone including economists got wrong. We all endured more lockdowns, some of us had the additional stress and time constraints of home-schooling, whilst others continued the unpredictable restrictions on workplaces and businesses. All the while, the Mornington Peninsula property market continued to defy any fear of job losses and industry shutdowns, with extreme growth driven by high demand and low supply.
Metropolitan Melbourne (which rightly or wrongly includes the Mornington Peninsula) was forced into tight real estate restrictions yet again over the winter months, mirroring the ban on inspections that we faced in 2020. This led some buyers yet again to purchase properties sight unseen – a dangerous tactic particularly on homes that carry significant value in the building.
The Mornington Peninsula surged ahead of the rest of Melbourne in terms of price growth, with some beachside suburbs experiencing growth of more than 40% over the previous 12 months. St Andrews Beach, Portsea and Rye being good examples of markets that had a huge increase in price growth. The former two were driven by a short supply, but the latter, Rye, became the affordable compromise market that attracted holiday home buyers looking for an escape from the daily grind.
In the 12 months prior, Blairgowrie had been the star performer, where land prices hovered around $1,500 per sqm. Fast forward to the middle of 2021 and land prices had surpassed 2,000 per sqm. This level now challenged Sorrento and consequently, buyer depth dropped away. The ripple effect meant that priced-out buyers were now looking at Tyrone Foreshore in Rye for some price relief whilst still having proximity to the quieter beaches and village.
St Andrews Beach and Portsea are perennial short supply markets and had come off long periods of subdued growth, therefore were due to catch up, but I don’t think anyone predicted the level that buyers were prepared to push prices. I’ll go over some specific results in the local market wraps below, but so far as to say that agents had all sorts of trouble quoting listings going to auction.
As we came out of our snap 7-day lockdown that lasted 12 weeks, overhanging properties were once again snapped up quickly and any hopes of more balanced supply were quashed when new listings only came through in dribs and drabs. As we approach the end of the year, buyer enquiries have dropped off according to most agents I have spoken to, and there’s a feeling of a more balanced status quo.
Enter Omicron, a new strain to test the market a third time. We saw the Alpha and then Delta variants have a positive effect on buyer demand, will we see this again in the new year? Enter the current inflation problem and mortgage fixed rate increases, which always signal the banks’ view on what the RBA will do in the future. Also enter the Federal Election, which has a history of cooling property markets. Will we see the market continue to grow, or have we now reached a ceiling? Which way will it go from here?
As we can see in the PropTrack weekly searches index (replacing the REA demand indicator) we can see the activity from buyers across the last quarter of the year for the past 3 years. The trend in 2019 was a balanced market, the last quarter of 2020 was a high demand market, and finally this year in 2021, the buyer demand has trended down to finish the year at the same demand levels as 2019. Could this be the signal that we’ve now returned to a balanced market? As I had written in my mid-year update, I believed the top of the market was reached in March/April, and this can be seen where I have circled the peak of the search demand. Yes, we were subjected to lockdown for 3 months during winter, but the drop in demand from April to July was evident that buyers were starting to keep their hands in their pockets.