This week I take a look at what happened to Melbourne during it’s 112 day lockdown and the parallels that can be drawn for what is happening in Melbourne, Sydney and Adelaide now. And more positively, our newest $3 million suburbs which include a couple of surprises.
What happened to the property market as a result of Melbourne’s 112 day lockdown? And will this one lead to the same result for Melbourne and Sydney?
Sydney has been in lockdown since the end of June, Melbourne since mid July and Adelaide has just started.. At this stage, all of these are still far less than what occurred in Melbourne which went into Stage 4 lockdown for 112 days. Here is what happened during Melbourne’s lockdown and what happened afterwards
- Properties for sale declined but then recovered towards the end of lockdown
The number of listing authorities through the Ray White network in Victoria halved from the start of the lockdown to the start of September. From here however, the number gradually picked up. By the end of September, they were back to 2019 levels.
- Prices declined during the lockdown but tracked the Australian average in following months
From June 2020 to December 2020, house prices in Melbourne dropped 2.3% while all other capital cities saw increases. In the first six months of this year, they grew 11%.
- Rents declined but units were particularly hard hit
Rents for houses dropped marginally but it was the unit market that was hit particularly hard. A combination of the lockdown, a large number of apartments built in previous years and foreign border closures impacting student numbers were the main factors here. Since the start of this year, rents for houses are increasing and it does look like we are starting to see a stabilisation of unit rents.
- The regional and outer suburban price growth story was particularly strong in Melbourne
All over Australia, we saw changes to the way people work, demand for second homes and a need for space drive purchases of big homes on big blocks in places not particularly close to CBDs. The strongest performer in Melbourne over the past 12 months has been the Mornington Peninsula where the suburb of Somers
- Luxury property did not do as well as other states
Luxury property has overall done very well over the pandemic with prices increasing significantly in most capital cities. In this regard, Melbourne is now playing catch up. Many of Melbourne’s most expensive suburbs such as Hawthorn, Canterbury and Armadale still recording house price declines.
- Melbourne lost people to regional areas and to South-East Queensland
In 2020, Melbourne recorded the biggest movement of people to regional Victoria ever recorded and the biggest movement to Queensland since the early 1990s recession. This boosted housing markets in places like Sunshine Coast, Brisbane, Gold Coast and in many regional Victorian towns
- The lockdown sparked a renovation boom
A lot of time at home, higher savings rates and the need for bigger/nicer homes sparked a renovation boom in Victoria with the state recording more approvals for alterations and additions to their homes than any other state, as well as the highest 12 month period ever recorded.
- Big problems for Melbourne CBD
Office, residential and retail vacancies rose rapidly during the lockdown and as a result the City of Melbourne estimated that economic productivity for the area dropped 22%. This is the most negatively impacted market by COVID in Australia.
Melbourne’s lockdown last year was different in a number of ways which is likely to lead to some differences in the impacts this time around for Sydney, Melbourne and Adelaide. In particular:
- Melbourne has always been the most restrictive to the way you can buy/sell/rent while under lockdown. This means a far harsher impact on properties available for sale. This is still the case for Melbourne in this lockdown.
- The lockdown was particularly long. At this stage, it is uncertain when the current restrictions will end
- Melbourne entered the lockdown at a time when there was no vaccine and the Australian economy was just beginning to recover. The current lockdowns are coming at a time when Australia is slowly being vaccinated and the economy is booming
- The real estate industry is adapting more quickly to changing circumstances including moving to virtual inspections, online auctions and fewer people at open homes.
The biggest certainty we have around the lockdowns is that properties for sale will decline and that at the end, we will see a jump in listings post lockdown. Depending on how long this goes for, we could be in for the strongest Spring on record when measured by properties available for sale.
We now have our first $3 million regional suburb and our first in western Sydney
Twenty years ago, suburbs with medians over $1 million were very rare and there were in fact only 16 of them. Now there are 881 of them, making a $1 million home relatively commonplace. The new benchmark for luxury is now $3 million and properties at this price point are certainly having a moment.
Over the past 12 months, the number of suburbs with medians over $3 million has almost doubled, from 29 to 56. What isn’t surprising is that most of the additional suburbs are in Sydney where house prices across all price points have increased at a blistering pace over the past 12 months. What is more surprising is that we have our first $3 million suburb in regional Australia, Bar Beach in Newcastle and our first in western Sydney, Horsley Park.
