Keen to upgrade your home? Make your move in 2020.


Significant opportunities are fast emerging in Melbourne’s residential real estate market to trade up to a better home or downsize to a prestige apartment.

With lower borrowing costs expected to push property values higher this year, prospective buyers could be advantaged by an upsurge in listings of higher-quality properties.

Nelson Alexander Sales Director Arch Staver says the 2020 market will be all about supply and demand. “The big question is how much supply lies ahead?” he says.
“Our forecast is that whilst the market will be considerably better than in the middle of last year, it is unlikely to be a repeat of the halcyon days of 2017.”

Property analyst group CoreLogic, also predict that cheaper borrowing costs will lift property asset values this year. But the group forecasts that mitigating factors, such as affordability constraints and higher stock levels, will keep price growth to moderate levels.

Upgrader buyers are a powerful force in real estate. As more downsizers and home owners relocate and release larger homes to the market, it prompts people who may own a two- or three-bedroom property to compete for bigger homes that are often in the more sought-after locations in particular suburbs.

There are some signs that supply is on an upward swing. Listings ramped up in the last quarter of 2019. And Melbourne’s first notable auction weekend for this year, on January 25-26, saw 89 properties go under the hammer, compared to just 52 auctions that were held on the same weekend last year.

Investors aged 50-plus are back in the market, too. Mr Staver says in the second half of last year Nelson Alexander saw a growth spurt in the traditional single-fronted terrace house market. “A lot of baby boomers with self-managed superannuation funds came back into the investment market when the banks started lending on an interest-only basis again,” he says.

“It was a bit of a surprise for some real estate sales people, because this happened straight after the Royal Commission into Banking, but it seems that the lending tap is back on. It will be interesting to see this year whether that particular type of investor is still as active in our market place or lured a bit more to the 7000-point-plus Australian Stock Exchange.”

Last year, dwelling values in Melbourne and Sydney finished the year up 5.3 per cent, according to CoreLogic. This reflected a surging end to the year in which property values fell in the first half and then gained 6.2 per cent in Sydney and 6.1 per cent Melbourne in the final three months alone.

With the Reserve Bank’s current cash rate set at a record low 0.75 per cent, coupled with improving stock levels, are the ace cards for upgraders.

CoreLogic head of research Eliza Owen expects price gains this year to be less than those seen in the second half of last year. “We are expecting further property price increases over 2020,” Ms Owen says. “This is partly because we are expecting another 25-basis-point reduction in the cash rate. But while we expect prices to increase in 2020, there are some mitigating factors including affordability and higher stock levels.”

With the Reserve Bank’s current cash rate set at a record low 0.75 per cent, coupled with improving stock levels, are the ace cards for upgraders.

“If you are making a seven-figure commitment on a transaction for a house, there couldn’t be a better time to take out a loan,” Mr Staver notes. “Buyers have the capacity to lock in the interest rate at a really low price, so I don’t see any reason to be over-cautious when money is accessible and you can in fact get that loan.”

“This year will be an excellent market for trading up. The only obstacle is whether those at the top of the property tree decide to release homes for sale. Unless that higher end, prestige property comes onto the market and begins a chain reaction, we will have to wait for those listings.”

“We really do need those listings to stimulate what I think is probably the biggest segment of the owner-occupier market – upgraders who move from the apartment to the single-fronted terrace, and from the terrace to a double-fronted house or the longer-term, 20-year-hold property on a decent parcel of land.”

He adds that owner-occupiers recognise they have to play a long game, “If it is the right house for you and within the price range you have set, you should be ready to commit to the transaction.”

If you would like to discuss your real estate needs, please contact any Nelson Alexander office.

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