Stage 4 COVID-19 restrictions are now in full swing in Melbourne, and while the six-week lockdown will certainly have an impact on the city’s property market, it will be short-lived.
Over the coming weeks, Melbourne’s property market won’t completely stop but will slow significantly. Search activity data from realestate.com.au shows that property seekers are still active in the city, but under stage 4 restrictions there will likely be fewer property transactions and construction activity won’t proceed at its regular pace.
However, what is critical to note at this stage is that the lockdown period is six weeks only, and given what we have seen following earlier lockdowns, it is likely Melbourne will get back to a more normal environment by the end of September.
The four key restrictions for Melbourne’s property market
While certain rules for Melbourne residents are very black and white, stage 4 restrictions for the city’s real estate sector have become clearer over the past week-and-a-half. These include:
- Private home inspections banned for buyers and renters until at least mid-September (unless it relates to a final settlement or end of lease arranged prior to the lockdown);
- Live auctions banned;
- A five-worker limit on new house construction sites and;
- A 25% workforce cap for larger sites (above three levels)
Melbourne’s property market will bounce back quickly
Looking at how buyer and seller sentiment is tracking using weekly omnibus surveys and analysis of search activity on realestate.com.au, we can see that property seekers are increasingly worried that it is going to take a lot longer for conditions to get back to normal in Melbourne. But more positively, we haven’t seen a plummeting of search activity in Melbourne like we did in the early stages of the first lockdown in mid-March.
While no-one wants to be in lockdown, it seems that this time around most house hunters realise that it will come to an end at some point.
If we look at what happened after the first lockdown in Melbourne, as well as in countries that have endured similar extreme restrictions, there was a strong bounce back in activity in the property sector once restrictions eased. Even in slow markets, properties are still being bought, sold and rented, and construction activity accelerated in an attempt to catch up with set timelines.
Not everyone will come out unscathed
It would be ignorant to imagine that there won’t be rising levels of financial distress for some Australians post-lockdown, which will force some property owners to sell up. While the Victorian and Federal governments are working to ensure that businesses and individuals can get through the lockdown in one piece, it’s inevitable that some will succumb to financial hardship.
However, if confidence can be maintained and unemployment and business failure is kept to a minimum during the six-week lockdown, it will ensure a much quicker recovery as we come out the other end.
The spring selling season will be different this year
At this stage, the outlook for the spring selling season in Melbourne remains uncertain, but if stage 4 restrictions are lifted as planned in mid-September we will likely to see an extended season. Here are my top four predictions:
1. Buyers will be active
A sharp increase in first-home buyer enquiry on realestate.com.au since the beginning of the year, off the back of government incentives like the 5% deposit scheme, HomeBuilder and record-low interest rates, could be unleashed post-lockdown.
2. Investors will remain subdued
Additionally, investor activity will likely remain quiet with international borders still closed, creating an even more optimal environment for first-home buyers.
3. Vendors will be keen to take advantage
While some vendors will be more cautious about market conditions post-lockdown, many others will be taking advantage of the strong demand. There will be an increase in distressed sales in some markets, however the extension of JobKeeper and JobKeeper payments, as well as mortgage holidays means we probably won’t see a sharp increase in these types of home sales.
4. Prices will remain steady
Prices to remain flat but highly variable within capital cities and across states
