Record Falls For Melbourne’s Housing Market - But Which Markets Have Suffered The Most?
In This Weeks How's The Market | Edition 33
Which Markets Have Suffered The Most?
Investors Are Back
A Good News Article (Not Fake News)
Record Falls For Melbournes Housing Market - But Which Markets Have Suffered The Most?
It’s no secret that the housing market has dropped nationally and that Melbourne and Sydney markets have been hit the worst, though has the drop effected every suburb equally?
CoreLogic released in their most recent monthly report that Melbourne dwelling prices have dropped by 8.1% on a rolling 12 month period to January.
Though some suburbs and some markets have suffered the drop more than others. The following chart from CoreLogic shows the suburbs that have been hit the most in Melbourne.
You will notice that the majority of these markets are above the median house price of Melbourne as it is typical for the top-end markets to experience sharper declines in a downturn.
Though some sales agents are stating that these figures are negatively skewed due to fewer sales in the top end, rather than actual price drops.
This is because of how the median is calculated. Remember that the median value simply means the middle number in a data set.
When prices are dropping, it is less common for expensive properties to come onto the market and transact, this means that there is a greater proportional volume of dwellings in the lower end of the market transacting which can greatly shift the median house price down.
This is especially true in suburbs like Malvern & Malvern East that have a large amount of 1 & 2 bed apartments selling for $500 - 700k next to homes selling for $3m+. This does not mean that the value of these homes has dropped by 15.9%, just that the median price in the suburb has.
A great way to counter this is to look at suburbs with homogenous markets - meaning 90%+ of dwellings are the same property type on similar-sized parcels of land and are of a similar value.
This can be common in relatively new suburbs and some regional towns as well that are majority houses. Have a look at the performance of some suburbs below with homogenous markets.
The top chart is for Officer in the southeast of Melbourne and the second is for Corio in North Geelong.
These suburbs are still definitely feeling the pressures of the dropping markets and interest rates with less demand, however, they simply aren’t seeing that reflect in large price drops.
What The Agents Are Saying
Last weekend I attended a few auctions around the $800k mark, typically I would see a few first-home buyers participating in this market, though for these particular auctions and homes, every registered buyer was on their second or third home.
The agents have said they are seeing the buyer demographic change on homes rather than diminishing the value. What used to be purchased by first-home buyers is now being purchased by older couples.
This auction had 5 bidders and sold under the hammer for the top of the price guide.
Some agents have been struggling with vendor management as home owners are refusing to drop their homes' prices to where the market is.
One home I have attended recently with a price guide of $1.9m - $2.1m has been on the market for 6 months without an offer. General feedback is that there has been interest on the home but not in the quoted range and closer to $1.6m - $1.7m. Instead of dropping the price, the vendor switched agencies and started running multiple campaigns for the property to no avail. I believe there will be multiple instances of houses that simply don’t sell due to this reason, though where the vendors are forced to sell, there could be room for negotiations.
The Wow Factor!
$11 Million In The Suburbs
24-26 Glen Moidart Drive, Berwick
One of the jewels of Berwick. From the manicured gardens, to the expansive double height ceilings, fountain inside and ironwork staircase - this property is not short of wow factors. Including the price - as this property has now been on the market for 13 months.
In The Media
Where investors can buy now and instantly pocket hundreds a month in rent
As house prices drop and rents increase, yes there are opportunities to buy positively geared properties based on a 20% deposit, however, that doesn’t mean you should buy in a mining town.
It’s articles like this that confuse beginner investors to chase yield rather than capital growth over the long r
Final Thoughts
If you’re going out to opens this weekend, ask the agents if the house you’re inspectings price has dropped from what it would be worth 12 months ago, or if the buyer pool has just changed.
Thanks for reading this far!
We value feedback and if you have any suggestions on what you would like covered in the future please email me at tristan@tomii.com.au
Happy Buying!
Note: This is my opinion, please seek your own expert advice when making decisions.
