Melbourne property values are still falling sharply, but slowing monthly declines and deep discounts on some property types suggest the market is becoming increasingly divided.
The Melbourne property market is behind only Sydney for price falls, with more losses in October, but there may be signs some parts of the market may be starting to reach a bottom.
The median Melbourne dwelling value fell 2.7 per cent in the three months to the end of October, and were down 7.6 per cent for the year, according to analyst Cotality.
That annual decline was behind only Sydney, where prices have fallen 9.4 per cent.
Yet the rate of decline appears to be slowing: in October the median Melbourne house price fell by 0.8 per cent.
That was less than Brisbane (down 2 per cent), Sydney (down 1.6 per cent), Perth (down 1.7 per cent) and Adelaide (down 1.2 per cent), the latest Cotality data shows.
Jeremy Rosens, Director of Gary Peer in Melbourne’s St Kilda , said the market hadn’t turned the corner, but if vendors were willing to meet buyers on price, there was a sense the worst may be over.
“We’re not seeing as much of a depressed market ,” Mr Rosens said.
“I’m not calling the market’s back, but I am saying there are buyers if the vendor will meet the market.
“There’s a sense that probably the worst has past and delaying a purchase won’t be much help,” he said.
Yet the city is comprised of many different sub-markets, and the Melbourne Cup Day rate rise will do the market no favours.
On 3 November, to tackle high inflation, the Reserve Bank of Australia increased the official cash rate to 4.85 per cent, which was the fifth rate rise this year, taking rates to the highest level in 18 years.
Either way, looking ahead to when the market does eventually turn, Mr Rosens said well located properties would be most likely to lead the upswing.
Properties with good amenities, such as being close to good shopping areas and parks, were best placed to ultimately ride the market recovery.
“Somewhere near a Chapel Street or St Kilda Beach, or a specific area that has some attributes around amenity, be it schools or transport, are going to bounce back faster for both investor and home buyers,” Mr Rosens told Australian Property Investor Magazine .
Good quality homes were also best placed for growth when the market improves.
“Fully-renovated period homes, homes with good architecture — good quality shines through,” Mr Rosens said.
Another factor at play was money flowing in from interstate.
“We are seeing a lot of capital coming in from other states, such as from NSW and Perth,” Mr Rosens said.
“But they’re mostly buying in the sub-$500,000 and sub-$600,000 apartment market.
“They’re mainly mum and and dad investors, just a garden variety investor, not buying ten properties but just buying one.”
Mr Rosens said there was also a consolidation underway by some buyers, who were seeking to maximise the capital gains tax exemption that applies to a person’s principal place of residence.
“Where people own a B-grade house and an investment property, they are selling both and buying one really beautiful home to live in,” Mr Rosens said.
Despite some signs the Melbourne market may be starting to bottom out, sentiment remained dire, according to John Bongiorno, Group Sales Director of Marshall White Group.
“In my 45 years in real estate, the sentiment is the worst I’ve seen. This spring is the worst spring since the recession of the early 90s,” Mr Bongiorno said.
Mark Di Giulio, Director of agency Barry Plant in Doncaster , in the city’s east, says in the current market, the “upsizer is the winner”.
“If you are trading from a smaller to bigger property the dollar buys you more, can get that extra room, square metres, pool, or that extra living area,” he told API Magazine .
“Whereas in markets past you would not have that potential, and so the upsizer is now winning.
“I’m finding people in my area previously compromising and (buying) townhouses and units, or subdivided lots, in order to get a superior location and suburb postcode, no longer need to compromise,” Mr Di Giulio said.
That meant those homes that had previously been the target of compromising buyers, especially townhouses on divided blocks, had been hit hard by the downturn.
“You can get a very large townhouse, previously selling at the $1.8 million to $2 million mark, and now pick them up for $1.4 million and $1.5 million,” Mr Di Giulio said.
We no longer have that clientele, that young professional family wanting a superior suburb, and compromising with a subdivided block, because they are now buying full blocks.
“Because of this, prices of duplexes and sub-blocks are really suffering in terms of selling and of holding their pricing,” he said.
As a result, it was those heavily discounted properties that would likely lead the way when the market turns.
“If you buy one and do nothing more than that, at some point that market will return,” Mr Di Giulio said.
