Melbourne Property Prices Outlook - 2020 Feb
Updated: Mar 16, 2020
With the Coronavirus (a.k.a COVID-19) hogging the news in recent months, we've been asked many times, for our opinion on how this virus is going to affect property prices here in Melbourne.
First, let's look at the property clearance rates for the last 4 weeks, and the outlook for the next 3 months.
After the traditional Christmas break, buyers are flocking back to the Melbourne market. This is reflected in the Auction clearance rates, which has remained high at around 80%. This suggests strong demand for properties in the market.
Is this going to last? This is the answer everyone wants to know.
Buyer sentiment is the biggest determinant factor. And over the next 3 months, that is going to be affected by, no surprises, the COVID-19 virus.
As of now, symptoms are rather mild, like a bad flu. Death rates outside of China is less than 0.2%, which is similar to flu. However, it is FEAR that is driving people into irrational behaviours. It is a very new virus. It is similar to the SARS and MERS viruses, but different enough to cause fear. The death rates are relatively low, compared to SARS (10%) and MERS (35%).
How is that going to affect the property market in Melbourne?
As of now, there seems to be little effect at all. The property market is probably fuelled by First Home Buyers, taking advantage of the First Home Loan Deposit Scheme (FHLDS). You know, that 5% deposit scheme promised during the 2019 Federal Elections. The first batch of 3000 was released in Jan 2020, and it was 100% allocated within weeks! The second batch of 7000 was released in Feb 2020, and was meant to last till 30 June 2020. However, indications suggests that it is not likely going to last.
Once this year's allocation of 10,000 FHLDS golden tickets has been allocated, buying activities are expected to slow. Which ultimately, could mean less demand for properties. This may or may not translate to lower prices, though, as vendors (sellers) still have certain expectations for how much their house is worth.
Melbourne Property Outlook
What does that mean? Put simply:
March till April (and potentially May) - we are likely to see stable property prices. It could see a slight rise of between 1-3%. The virus is still going to be bothering us for the next 2-3 months. Buyers could stay away from auctions, or their focus could shift to maintaining their businesses and jobs.
May till June - Judging by how quickly the situation has stabilised in China, we are likely to see the situation stabilised and put under control. We will be more familiar with the COVID-19 virus by then, and would have developed more pragmatic plans to get on with our lives / businesses / jobs / economies, etc. This is going to help with buyer sentiments. Prices are likely to be flat, and could retreat slightly (so slight, that it is hardly worth waiting for), although some suburbs (typically the top end suburbs) might see a more significant fall in prices.
July and on - When 2021's allocation of 10,000 FHLDS is released, we could see First Home Buyers get back into the market again.
In short, we are unlikely to see any major dips in Melbourne property prices. We might see a slight dip, but that's hardly worth the wait.
Finally, when is a good time to buy? It depends on your risk appetite. If you are risk adverse, wait till the Virus is under control. But you'll be missing out on some really good deals.
For the risk takers, and our regular followers you would know, by now, that the best time to buy is when no one is buying. So, get your finances ready, start to keep a look out or give us a call.