Overseas Money Is On Its Way!

How’s the Melbourne Property Market? July 6, 2022

You might recall I mentioned last week and a few weeks prior that we are in for an influx of overseas money looking to call Australia home.

We saw an auction over the weekend in Doncaster East sell for $410k over the $2m reserve price, with six bidders duking it out. The winning bidder, would you believe, bought the property on a live stream over FaceTime from Malaysia. Even in our own business, we have had engagement from clients overseas looking to relocate or come back to Australia after living abroad.

Throughout 2022, an estimated 88,000 millionaires will move to a new country, according to the latest Henley Global Citizens Report (great report BTW).

Source: Henley & Partners

The top countries with millionaire outflow are Russia (15k), China (10k), India (8k) and Hong Kong (3k). Where are they moving to? You guessed it, Australia is number two on the list with 3,500 millionaires planning the move here, just behind the UAE’s 4,000 taking the top spot.

Australia has been on the list for a while too, as according to New World Wealth roughly 80,000 millionaires have made the move to Oz over the last 20 years.

A few points of attraction are our low-cost healthcare, we don’t have an inheritance tax and our generally prosperous economy. The one thing they often forget about is how high stamp duty is in Australia, but hopefully, that will turn into land tax over the next few years.

It was Melbourne's east which sat in the spotlight this week amongst news articles and agent updates with multiple properties selling at auction well above the range along with the Doncaster East property above.

I had a look at some of these sales, and they were all solid family homes in great locations, which shows that good properties will always sell no matter what’s happening in the economy. This brings up a popular Warren Buffett phrase which I have converted to suit property, “It’s far better to buy a wonderful property at a fair price than a fair property at a wonderful price”.

What the agents are saying

With overall clearance rates hitting 41% in Melbourne combined and Sydney seeing below 40% at 38% for the first time this year, it's obvious there is a change. That change is the way people are buying, and something I remember not so long ago, maybe 2018 when agents knew they were not going to sell at auction, so they would pass the property in, within 2 mins, and used the campaign as marketing to sell the property afterwards.

Movement in the markets we were working in

$2m plus (Houses)

Again, this is where we saw the most action in the market and they were mostly upsizes looking for that new place to call home, and being more in a position of need, so they aren’t worried about the short term.

This mentality does lend itself to my beliefs on property and how it shouldn’t be viewed as a transactional item, as it’s something you buy and hold for a LONG LONG LONG time! Everyone reading this might not want to be the Warren Buffetts of the world, but I would think most people in Australia would like to create some sort of wealth in their lifetime and property has proven many times over of its ability to do this if you just hold it.

During our calls, there are lots of people away at the moment, and I’m sure everyone knows someone in Europe (with covid) or up North taking a sabbatical. Because of this and across all price points we should start to see listings increase from next week, with the first major auction weekend being the 13th of August.

$1m-2m (Houses)

This price point has certainly picked up over the week as people look to get in before the rate rise for some reason? It’s evident that these buyers have spoken to their brokers and understand where their affordability sits giving them the confidence to push forward with the purchase.

This coming week will show us if the rate hike has scared this market off again, or if they are better educated to deal with what’s happening in the economy.

Sub $1m (Houses)

The safest and least volatile market given it's our largest has fared pretty well and has been the most consistent. We tend to see less auctions in these markets with most properties selling via private negotiation. Like previous weeks, the agents have mentioned it's not 10 offers on the first open, but they are still getting 1 or 2 with 3 - 4 serious buyers on the good properties.

Why I mentioned good properties is because this price point will also attract sub-par properties but maybe in the form of apartments and townhouses. These are the ones that always struggle in these times because they just aren’t good properties. I've done a short video HERE with examples of this and why we avoid these certain properties like the plague.

In the media

“One-third of Australian first home buyers can’t afford their homes” This was an article I saw on a couple of media sources during the week.

I'm not sure where they got their information or if this is something they are predicting with the rate increases, but the story said buyers were scammed into paying above their budget at auctions via underquoting and they won’t be able to afford their repayments.

First of all, they won’t even be able to settle the property if they have gone above their lending capabilities because the banks set parameters in place with an additional buffer so people can take a few rate rises over the course of having the loan. Second, going above your budget doesn’t mean you can’t afford it, it just means it's above what you want to spend and not what you can spend.

This is why I can’t stand mainstream media, and if you only read the headlines (which a lot of people do) then you would probably think along the lines of the market is going to crash because of mortgage stress. I had better sell my property to get out, or if buying, I’ll wait for this until I make a purchase.

Final Thoughts

I know I’ve mentioned this before, but we are just in a normal market, and normal sounds much better than losing at auctions week after week, while increasing your budget and lowering your requirements.

If you are in the market, use this time to get out there and start the conversations with agents to get access to property pre-market or off-market as there are plenty of them out there. If you need help with this, get in touch with us. 

Waiting for the bottom is not a strategy because the only way to know it’s hit the bottom, is when it starts to go back up.

Happy Buying!