VIC What will happen with Melbourne RE in 2021?

I try to predict what will happen with the Melbourne RE market in 2021. In particular, in the inner West and inner North for houses and townhouses.

The stock seems to be very low in many areas (all areas?).

What do you think will happen in March when traditionally more properties hit the market? More stock and prices will go down?

Will the end of the mortgage "holidays" in March affect the market (e.g. more people will be putting their properties on the market?)

Will the end of the tenant eviction moratorium (in March again) effect the stock/prices?

 

I’m inexperienced to property market...
but my two cents:

Will the end of the mortgage "holidays" in March affect the market - not. As an ex-banker, the banks will make very considerable effort to not takes the securities back, coz it is not in their interests (when properties price reduced, the value of collaterals also reduced) AND banks employees are human beings as well, despite many Australian dislike the banks... there will be strong sentiments among the banks to try to help and not force LOTS of people to lose their homes during the pandemic... and therefore the policy will follow suit...

What do you think will happen in March when traditionally more properties hit the market? More stock and prices will go down? —— I would like to know what others think about supply—— As someone actively looking to buy now, only my two cents , the price will not drop at least in the Eastern and South Eastern and will stay strong and will likely to go up—— so many potential buyers out there with so few quality properties at the Median price and above ...

 

Thank you for your 2 cents.
I also see that the market is very hot in the inner West and North. All open inspections I attended today had many interested parties, some had queues to go in.
I wonder if conditions will be easier for buyers at some stage this year...

 

CBA - the biggest lender for property mortgages, predicts 6% price fall (from their 10% prediction during Covid), so I would say at the moment because of scarce supply you might be facing stiffer competition, but when supplies increase it should reflect in slightly lower average prices.

Although I suspect the majority of those big percentage losses will come from the top end of the market. The lower end, 500-600k or below will stay steady as traditionally first home owners are restricted in budget and investors in that price range should have expectations of flat capital gains in the medium term and are seeking yield. So good quality properties in good areas will not be any cheaper, the demand is there - so if you're seeking something best to get chummy with the RE agents and put yourself on their radar. They will have off market opportunities if you're a serious buyer. Any decent property will probably go under contract before the first public open inspection.

 

Thanks for the input, @Onyx_OCAU.
I better do introduce myself to several local agents. See where it will get me.
At the moment, anything worth looking at is going to action...

 

In may 2020, CBA predicted base case 11% fall , worst case 32% fall. I won’t worry too much about their predictions.

 

You are referring to an outdated CBA forecast at the height of the Melb shutdown & associated gloom on Sep 3. That forecast has been updated twice now.

CBA sees 'quite buoyant' property market

"..Like most of the banks, CBA had built substantial house price falls into its economic scenarios at the start of the crisis.

But the combination of low interest rates, stimulus measures and the nation’s handling of the health crisis now means Comyn sees house price growth of 5 per cent in calendar 2021, albeit with variations from state to state.

Comyn said the banking sector would need to watch for the potential for overheating in the property market given extremely easy monetary policy settings.

He said it was a very different environment to back in late 2014, when the Australian Prudential Regulation Authority introduced macro prudential measures to cool the market.

Back then it was demand for property investors that was driving property prices and loan growth. But this time around, Comyn says demand from property investors is close to non-existent."

CBA now expects (like all other major banks, forecasters, analysts) for prop nationally to be up over 7% in 2021 and by similar margins in 2022- although this remains a conservative forecast.

 

Any Melbourne specific predictions? What do you hear from your contacts on the ground? More stock from Feb?

 

Just follow the weekly auction clearance rates and weekly core logic movement of price index and you will get a very good understanding on the underlying sentiment. It is the 'sentiment' that drives the markets. I am biased with a large Melb based portfolio but I expect Melb to be up >10% (outside of CBD) - outer melbourne is already up c5% in dec quarter.

 

Prices will.....
Stock will.....
Buyers will.....
FHB will......
Developers won't.....
Banks won't......
Interest rates won't......
Vacancies may.......
Rents will.......
Unemployment will....
Govt budget will.....
Overseas investors won't......

Hopefully that sums it up.

 

Melbourne auctions: Post-lockdown demand, confidence, fuels strong auction results

 

Well, we all see a surge in demand due to low stock and other important factors. The question is what happen next this year in Melbourne...

 

Crystal ball stuff, waste of time trying to 'know'.

My broken record for years on the forum is buy when you can, look for value ( including add value if you can), stay within your risk parameters and have a medium to long term timeframe in mind. Anything sooner is a bonus.


Apart from that, it's all crystal ball stuff.

What you can do is look at ACR rates, supply/demand imbalances, SOM changes, discounting percentage changes, growth changes quarter on quarter etc CURRENTLY in the market and then attempt to make some kind of intelligent guesstimate of where markets may head.

But it's all speculation.

I laugh when some people say they do not speculate but invest. All investment in any asset class or business is speculation. There is no such thing as certainty and therefore you have to speculate. Some speculation may be higher risk and some may be lower on a spectrum of low to high risk.

 

A big variable will be government support and how the economy performs. My company will make 20% of staff redundant this year. It's not the only business that will have to squeeze costs to maintain profit.

 

Government support has been unwavering throughout and it's only going to increase ( thks to lib government).

And 20% possible redundancy in a company I personally doubt has any impact on the overall market which is steaming ahead . Probably 50-80% of the employees rent anyway.

Imo currently what makes the biggest impact will be:

1. Continued gov support. Tick.
2. Low interest rates. Tick
3. Strong market and growing sentiment. Tick.

I would be shocked to the core if markets tank this year.

I'd speculate markets ( of course not all) will see another 10- 15% growth by December.

 

20% is a lots of people. But It is the scale that matters, and the wider group of people need to feel it to have an impact on the overall sentiment. The unemployment issue will come in cycles and depending on the industry and the position of supply chain, won’t affect everyone all at once.

 

I am wondering if what we see now is largely a supply issue. Not many wants to sell now for various issues which creates a huge lack of stock and prices are going up.

When people are more confident in putting there properties on the market, the prices are potentially stop going up that much.

Other factors of course play their roles as well.

What do you think?