The opening up of Victoria this week also opens up a delayed opportunity for the state’s property market to catch up with the rest of the nation.
As capital city property markets reported modestly improved residential prices over the month of September, Melbourne has been the sole city in decline, showing a drop of 0.2 per cent. The city is also the showing the worst numbers among capital cities for the year to date, with a drop of 3 per cent.
Moreover, any attempts at reading the city’s property temperature have been fraught with danger, since the real estate industry has been effectively suspended in recent months. On one weekend the total number of auctions (online only) across the city of 5 million came to the grand total of 11.
Victorian real estate professionals have been struggling with state restrictions for months. But this coming weekend the city expects an approximation of normal auction activity – with Labor Premier Daniel Andrews allowing real estate offices to open midweek.
Auctions recommenced last weekend with a limit of just ten people. Nevertheless, the volume of activity is rapidly returning to normal. At last count Melbourne was looking at 687 auctions this weekend which is enough for industry analysts to start recording genuine price and clearance activity. Sydney will have 974 auctions.
CoreLogic head of research Tim Lawless says: “I think it is quite possible looking at the activity in the city already that we could see Melbourne join the rest of the country with an uptick in prices, perhaps not until November, but certainly by the end of the year.”
However, the prospects of Melbourne homeowners and investors finding themselves back in a conventional market remains challenging with signs that prices at the top of the market may move higher independently of the wider market in the first months of any recovery.
There are also signs that mortgage payments problems will be particularly acute in Victoria after the longest and most severe economic lockdown seen in the country.
In Bendigo Bank’s trading update offered to the market this week, Victoria took out half of all mortgage deferrals. Bendigo’s mortgage book is 38 per cent based in Victoria, but the state took out 50 per cent of deferrals.
Separately, a report on financing in the residential market from the Moody’s Investor Service pinpoints Victoria as an ongoing trouble spot for a national market trying to get back on its feet.
The ratings agency says Australian mortgage delinquency rates have increased because of the economic fallout from the coronavirus, rising to the highest since 2005 in Victoria. In contrast the delinquency rate in New South Wales was the highest since only 2013. National delinquency rates rose to 2 per cent in May.
As Moody’s warns: “Delinquency rates will vary across states, cities and regions, depending on economic circumstances in each area, which will be closely tied to virus outbreaks and measures to contain them. Risks will be higher in Melbourne and Victorian regions because their extended lockdown to contain coronavirus cases will delay economic recovery compared to other regions.
“The Australian housing market will remain soft over the next year, which will contribute to mortgage delinquencies. Apartment prices are more at risk than house prices given the lower demand for units in the current uncertain economic environment. Prices in areas with a high concentration of coronavirus-exposed industries will also be at risk,” the report suggests.
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