We are always concerned about the value of our real estate holdings. Our homes represent much of our security and should a drop in value occur, we all suffer.
What is the likelihood of a substantial drop in the value of real estate, in particular, Melbourne residential real estate?
Residential real estate values tend to be connected to employment and income. When unemployment occurs and incomes drop, confidence is damaged and this has an impact on all consumer items, including shares, motor vehicle sales and, of course, real estate.
Federal Treasurer, Josh Frydenberg, has estimated that unemployment will double by the end of June 2020. This would place the unemployment rate in Victoria at around 11%.
Whilst housing sales for 2019 rose during the first two months of the year and then plateaued, this year, sales numbers have risen more quickly and they have, since early March, dropped in number very significantly.
By mid-April, national sales volumes dropped by approximately 3,000 properties as compared with the same time in 2019. This is a drop of approximately 34% and ties in with the ban on in-person auctions and open for inspections, both events which have impacted greatly.
In Victoria, housing sales this year, compared with 2019, have dropped by about 40% compared with the national average of a 34% drop.
Interestingly, the regional sales drop has not been as dramatic as the metropolitan sales drop on a national level, with properties taking, on average, about 50 days to sell, which is exactly the same as in 2019. This latter statistic is interesting as the evidence indicates that there are less properties on the market at the moment than there were at the same time last year. Because of this lack of stock, properties may be selling more quickly than they would have otherwise.
Again, it appears as though regional properties are selling far more slowly than metropolitan properties.
The big question is – what is happening to housing prices?
The evidence suggests that housing price growth has diminished in all states, however, there has been some growth across the nation.
The Governor of the Reserve Bank, Phillip Lowe, and Victorian Treasurer, Tim Pallas, have both forecast housing price contractions by at least 10% by the end of this year. Despite this, many are predicting that when live auctions return and other restrictions are lifted, the market will return to normal with housing values holding.
Should you be in a position to sell your property or if you are looking to buy, we at Alpass & Associates remain available to provide you with professional personalised attention at affordable rates. Please ring any member of our conveyancing team, Jill, Sue or Nina, on 9725 0377 or email info@alpasslaw.com.au for further information.