‘Testing time’: As Melbourne’s spring selling season begins, will property prices keep going down?

‘Testing time’: As Melbourne’s spring selling season begins, will property prices keep going down?

08/26/2022

Key points

  • Melbourne’s spring selling season is set for a quiet start because buyers and sellers are cautious as interest rates rise.
  • Economists expect prices in Melbourne to fall by between 15 per cent and 18 per cent.
  • Some sellers aren’t worried, moving ahead as they will be buying in the same type of market.

Property listings

Melbourne home buyers and sellers normally rush in to the spring property market, but many are holding back this year.

Multiple interest rate rises – with another expected in September – and a sharp increase in the cost of living have slashed what buyers can afford to spend and reduced demand from buyers who are waiting to see what happens.

The start of spring is expected to be slower than usual, with buyers and sellers both holding back as the real estate market shifts gears.Credit:Glenn Hunt

Domain chief of economics and research Dr Nicola Powell said it would be the first spring since 2019 that was not hampered by COVID-19 restrictions, meaning sellers and buyers would be able to take their time before jumping in.

“It’s going to be a spring to provide better opportunities for buyers out there and activity levels are obviously going to increase, but could be lower in comparison to other years,” Powell said. “We’re not going to see a sudden rebound in prices because this spring will be in a downturn market.”

Agents expect a quiet start to the season and say some nervous buyers and sellers have been rethinking their approach.

New listings are on the rise, but not booming, as sellers tiptoe to the market. New listings in Melbourne lifted just 3.1 per cent over the four weeks to August 21 compared with the previous four weeks, Domain data shows, though they are 26.6 per cent higher than the same period last year when Melbourne was in and out of lockdown.

Buyer demand has also taken a hit, with the number of active buyers on domain.com.au who shortlist properties for sale or make an enquiry online down by 14.5 per cent for houses and 13.8 per cent for units over the month, compared with the three-year average for this time of year in Melbourne.

Jellis Craig partner Michael Armstrong said this year was not the same as others and that he was expecting October, normally the busiest month of the year, to be much slower.

Listing volumes in the upper end of the market were lower, with fewer people looking to sell their family homes, he said, similar to during the global financial crisis.

“In a crisis, the typical behaviour we’ve seen is that people stop, and they wait to see what will happen and will wait until after it’s happened,” Armstrong said. “People who are 50-50 about selling this spring might be waiting to see what happens and will wait until next year.”

Even though the outlook for the start of spring is slower, some sellers and buyers are still keen. Melbourne’s auction clearance rates have ticked higher, remaining above 55 per cent for the past three weekends.

Auction numbers are also on the rise, with 730 scheduled this weekend, a jump of 12.5 per cent compared with last weekend.

Adam Bulic is selling his home in Balwyn North during spring and is not worried.

As the executive director of housing developer Bluestar Living, he has ridden the highs and lows of the property market in Melbourne before.

Adam Bulic, executive director of BlueStar Living, is selling his Balwyn North home of five years.Credit:Simon Schluter

He’s selling the stylish home, which he built and where his family has lived for the past five years, and is hoping to buy and build again in the inner east. He knows he will be buying in the same type of market he is selling in.

“Everything is relative. Some people will always pay a premium for a property in a really good area. Because I’m looking again, I need to pay a premium as well.”

His view is that the long-term outlook for property is, as it has always been, that values can only rise.

Bulic’s selling agent, Ray White Balwyn director Helen Yan, is – like other agents – expecting a slower spring market.

“The market is quiet because of the increased interest rates,” Yan said. “At the moment, it’s similar to 2019 and people are holding back – it’s a nervous time for people, including Chinese buyers.”

Though the market had slowed and fewer properties were being listed, homes were still selling under the right conditions, she said, especially those that did not need renovation or building work.

The buyer caution could translate to further price falls, economists predict. Westpac’s latest forecast is that prices in Melbourne could fall 8 per cent this year and 10 per cent in 2023. ANZ has also cut its outlook and expects falls of between 10 per cent and 15 per cent by the end of next year.

Westpac senior economist Matthew Hassan said spring would be a testing time for the property market in Melbourne.

“There’s a meaningful correction underway and more interest rate rises are to come,” Hassan said. “Sales have pulled right back from their very high starting point earlier this year … and sellers might find they are heading into a buyers’ market.”

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