Value-hunting younger buyers on track to save money
A critical factor that greatly benefits younger property buyers – indeed, any buyer – is to take the plunge into the market when other prospective buyers are holding back.
Nelson Alexander Sales Director Arch Staver says that due to the COVID-19 pandemic there is great value for money available in Melbourne at the moment.
“There are some excellent purchasing opportunities for young buyers because vendors have never been more willing to accept lower offers,” he says.
“Vendors are seriously weighing up offers that would never have been considered in a strong to normal market.”
Many potential buyers and sellers are now sitting on the sidelines and playing a waiting game.
Even though stock levels in Melbourne have reduced in recent weeks, the competition for the available properties is much less.
So, provided you have your loan finance approved and are prepared to take action, chances are you will purchase a home for less than what it would have cost six months ago.
For most Australians, the best time to enter the property market is in your early to mid-twenties.
Securing a house or apartment at a young age not only jump-starts your wealth portfolio, it’s also a smart savings strategy that can set you up for the long term.
Just don’t expect the coronavirus-influenced window of opportunity to last for long.
Mr Staver says first-time and other buyers are in a position to “really seize some opportunities” in the current climate.
“But if they want to sit back and wait, they will probably end up transacting in a marketplace that will not give them as much choice,” he says.
He says smart buyers almost always act against the wave of enthusiasm for taking a “do nothing” approach to the market: “For example, buyers who bought during the banking royal commission or during the earlier global financial crisis reaped the benefits when normality came back.”
According to the latest CoreLogic Home Value Index, released on May 1, home values fell in Melbourne during April and rose at a slower pace in other capital cities as the coronavirus-linked economic fallout started to affect the housing market.
Melbourne home values slipped 0.3 per cent last month to a median value of $695,761 – a figure that includes both houses and apartments. Most other capitals recorded slower growth rates, not declines.
Because of these price pressure trends, there are new opportunities to purchase homes for under $600,000 in parts of Melbourne. Recent data suggests that areas such as Glenroy, Reservoir, Mill Park and Keilor Downs are opening up to first-time buyers keen to buy for under $600,000, while suburbs closer to the city are also experiencing some downward price pressure.
CoreLogic head of Australian research Eliza Owen says despite a fall-off in market momentum, national values largely have not yet fallen into negative territory as property is a more stable asset class compared to shares.
First-home buyers are eligible for full stamp duty concessions and the First Home Loan Deposit Scheme for homes valued up to $600,000.
Some 35 Melbourne suburbs would see house prices dip below $600,000 if the market fell by 10 per cent. They include Lalor, Tullamarine and Mill Park.
Even if these suburbs saw modest price declines of 5 per cent or less, such a development would attract upsizers and second-time buyers away from Melbourne’s more affordable areas – giving first-home buyers more choice.
The latest data from the Real Estate Institute of Victoria reveals the strong performance of the Victorian property market in the lead up to the crisis.
REIV President Leah Calnan says that these numbers show the underlying strength of the market. “Even though we are currently experiencing some difficult conditions, we believe that the market will return to its buoyant form when restrictions are eased,” she says.
Ms Calnan says the Victorian property market achieved record-breaking growth prior to the COVID-19 pandemic, with the REIV Quarterly Median House and Unit report for the March quarter revealing great results across the state.
REIV data, which uses different statistical methodology to CoreLogic to measure median prices, shows that during the March Quarter metropolitan houses rose to a new record height, eclipsing $890,000 for the first time. This was a 3.7 per cent growth on the previous December 2019 quarter. Units (including apartments, townhouses and flats) across metro Melbourne have recorded the highest quarterly median value at $641,000, according to the REIV.
The market situation is fluid and can change quickly, judging by past history.
Australia appears to be on track to shift away from the originally-proposed six-month “business hibernation plan” towards an exit from containment policies after about two months.
The national cabinet’s success in flattening the curve, or the COVID-19 infection rate, is expected to morph into an “Operation Kickstart” sometime in May.
This may prove critical to the housing market’s trajectory. A one-to-two-month lockdown followed by a concerted effort to get workers back into full employment and to turbo-charge the Australian economy will minimise the impact of mortgage arrears and losses.
“Real estate had a strong start to 2020 – property values have reached new heights across the state during January, February and March,” Ms Calnan says.
“Auction clearance rates, which are often used as an indicator of buyer interest, were recorded at an average of 75.7 per cent from 6931 auctions during the quarter – up from 56.4 per cent from 5573 auctions in March 2019 quarter.”
If you would like to discuss your property needs in detail, please cotact your local Nelson Alexander office.