Blogs

A two-speed property market has emerged in Melbourne during the coronavirus crisis, with some inner-city sellers accepting price drops as large as 20 per cent while more affordable areas shrug off market jitters.

Stretched home-owners who had taken on large debt loads to buy in pricey neighbourhoods are less able to ride out the recession, experts warned, while agents are now starting to see occasional forced sales by those who have lost businesses.

House prices across Melbourne as a whole fell 3.5 per cent in the June quarter, the latest Domain House Price Report revealed.

But falls were sharpest in inner Melbourne, which includes suburbs such as the CBD, South Yarra and Fitzroy and lost 3.9 per cent. The inner-east region, spanning Kew to Doncaster, fell 3.8 per cent.

Domain senior research analyst Nicola Powell said the most expensive houses were usually the first to rise in price in an upswing, and the first to fall in a downturn.

“The [inner suburbs] saw a strong rebound coming out of the downturn and I think particularly in the upper end they tend to be more sensitive to changes in economic conditions. They see bigger swings up and down,” Dr Powell said.

“What we tend to see in areas where households are more indebted, they’re more sensitive to changes in the economy.”

Even so, Dr Powell said the extension of mortgage holidays and JobKeeper had softened the market weakness, with few homes changing hands during the height of the first lockdown.

Marshall White director John Bongiorno, who focuses on the eastern suburbs, said while the market had deflated it was doing reasonably well given the pandemic.

“It’s down anywhere from zero to 20 per cent, it just depends on what we’re selling,” he said. “I think the market has been very resilient during all of this, the JobKeeper and JobSeeker news was positive from the point of view that they’re working three days a week and their salary has been reduced, they can still pay their mortgage and they don’t have to sell their property.

“We are seeing it [forced sales] where people’s incomes or businesses have been decimated,” he added, but said this was not as bad as during the period of rising interest rates in the 1970s and 1980s.

Despite the recent drop, inner-east house prices are still 10.2 per cent higher than a year ago, while the inner region is 4.7 per cent up on last year.

“They did have the steepest falls but they had the biggest growth in the lead-up to these falls,” Dr Powell said. “We were seeing 7 to 8 per cent gain over the final quarter of 2019 in all the inner areas.”

Regions that don’t rely on high levels of debt, like the west and north-west, were doing much better recently, Dr Powell said.

Prices were up 2.5 per cent over the quarter and 6.9  per cent over the past year in the west. The north-west rose 3.1 per cent over the last three months and is 6.8 per cent higher than a year ago.

Ray White Werribee’s Mitch Bourchier said June had been one of the busiest months of his career.

“We listed and sold 32 this month and the month before was 49,” he said. “Anyone who was thinking of selling in the next 12 months has just pulled the trigger and bang.”

His client Josh Swanwick, a glazier, did just that, deciding to sell his home and try to upgrade once lockdown had ended.

“There were rumours of the market dropping, so we decided to put it up and get it sold for what we could before that potentially happened,” he said. “It almost worked out too perfectly. The agents got it all done really quickly.”

Mr Swanwick said the time pressure had been a big factor in their decision-making.

“Even though my job is secure, as things get more strict banks are making it harder to get loans so the longer we waited we might not have been able to get a loan,” he said.