Melbourne property sellers cancelled four in 10 auctions this weekend amid a worrying second wave of infections.
Prices in the city have yet to suffer major falls, but following the Treasurer’s economic update on Thursday, analysts are again warning of massive drops to come. And not just in Melbourne.
As Victorian Premier Daniel Andrews prepared to announce a further 10 coronavirus deaths and 459 extra cases on Sunday, property analysts CoreLogic released weekly auction data demonstrating the impact of the second wave on Melbourne’s property market.
The Victorian capital, which is currently not allowed to conduct physical auctions, had 545 auctions scheduled for this weekend.
Of the 450 auction results captured by CoreLogic, 186 were withdrawn from the market and 224 ended in successful sales, giving Melbourne a preliminary clearance rate of 49.8 per cent.
That’s much lower than the early-to-mid 60s seen in late May, and well down on the 71.7 per cent recorded during the same week last year – a result that came on the back of 544 auctions.
It was also much weaker than the 68.3 per cent recorded this week in Sydney, where only 16 per cent of properties were withdrawn from auction.
CoreLogic noted, however, that both markets returned clearance rates above 80 per cent when withdrawn auctions were removed – demonstrating that “properties which aren’t withdrawn from the market are still finding buyers”.
Belle Property Albert Park principal director David Wood, who sold a two-bedroom home in Balaclava for $1,378,000 over Zoom on Saturday, made a similar point.
Middle market reigns supreme
Although one-bedroom units are suffering as a result of declining investor participation and falling migration – with some prices having already fallen by 20 per cent – Mr Wood said house prices in inner-city suburbs were holding up and would likely stay that way.
For example, period homes in inner-city suburbs within 10 kilometres of the city, such as East Melbourne, Fitzroy and Carlton, were still selling at pre-pandemic prices, he said.
However, solid pricing and presentation are more important than ever, with buyers most interested in homes that are selling either at or below the median price for the suburb.
“My message to all vendors would be: If they would like to sell now, they need to have a really honest and robust discussion with their agent,” Mr Wood said.
If that feedback is not to the vendor’s liking, then there’s no point in going to the market, because it’s not the market for blue-sky and crazy dream prices.”
Mr Wood added that many buyers recognise that it’s a good time to upsize, as more expensive properties tend to suffer large price falls during a downturn.
But that’s not to say Melbourne’s second wave has only spooked a handful of vendors.
Analysts have suggested the pandemic will deliver a massive blow to house prices as people lose their jobs and are forced to sell their homes when mortgage holidays end.
SQM Research managing director Louis Christopher warned in April that the coronavirus could slash property prices by 30 per cent if there is a second wave of infections and restrictions stay in place beyond September. (Commonwealth Bank tipped an even larger 32 per cent drop.)
Following the release of the government’s Economic and Fiscal Update – in which Treasury estimated that migration would fall from 232,000 in 2018-19 to just 31,000 in 2020-21 – Mr Christopher said the probabilities of his worst-case scenario had “no doubt increased”.
“It’s not a crash at this point in time. It’s more an orderly decline,” Mr Christopher told ABC News.
“But it’s Sydney and Melbourne which are the primary concerns.
“And what’s triggering this downturn in Sydney and Melbourne in particular, it’s not just the downturn in the economy, it’s the specific closure of the international border, which has meant that the normal migration numbers that we have – we’re just not getting.
“And those migrants generally come to Sydney and Melbourne first, and they take up the surplus stock that we built each year.”