Ray White chief economist Nerida Conisbee has analysed the parallels between Melbourne’s 112-day lockdown last year and what is happening across Melbourne, Sydney and Adelaide now in terms of property listings and sales.
Sydney has been in lockdown since the end of June, Melbourne since mid-July and Adelaide has just started. At this stage, all of these are less lengthy than Melbourne’s 112-day Stage 4 lockdown last year.
Last year, the Ray White network in Victoria found the number of property listings halved from the start of lockdown on 7 July until September. By the end of September, the state was back to 2019 levels.
From June 2020 to December 2020, house prices in Melbourne dropped by 2.3 per cent, despite all other capital cities seeing increases. In the first six months of this year, Melbourne’s house prices grew 11 per cent.
All over Australia, people’s work and lifestyle changed, creating greater demand for a second home.
Australians’ desire for more space established a precedent for the purchase of big homes on big blocks in places not particularly close to CBDs. The strongest performer in Melbourne over the past 12 months has been the Mornington Peninsula.
Melbourne recorded the biggest movement of people to regional Victoria ever and the biggest movement to Queensland since the early 1990’s recession. This boosted housing markets in places like the Sunshine Coast, Brisbane, the Gold Coast and in many regional Victorian towns.
A lot of time at home, higher savings rates and the need for bigger/nicer homes sparked a renovation boom in Victoria. The state recorded more approvals for alterations and additions to their homes than any other state, as well as the highest 12-month period ever recorded.
Meanwhile, Melbourne’s most expensive suburbs, such as Hawthorn, Canterbury and Armadale, all saw declining interest. These areas are still recording house price declines.
Office, residential and retail vacancies rose rapidly during the lockdown and as a result the City of Melbourne estimated that economic productivity for the area dropped 22 per cent. This is the most negatively impacted market by COVID in Australia.
Rents for houses dropped marginally and the unit market was hit particularly hard.
The apartment and unit market suffered from a combination of the lockdown, a large number of apartments built in previous years and foreign border closures impacting student numbers.
Since the start of 2021, rents for houses are increasing and it does look like we are starting to see a stabilisation of unit rents.
Differences from current restrictions
Melbourne’s lockdown last year was different in a number of ways to what is currently occurring in Sydney, Melbourne and Adelaide. As a result there will also be different impacts.
In particular, Melbourne has always been the most restrictive to the way you can buy/sell/rent while under lockdown.
This means a far harsher impact on properties available for sale. This is still the case for Melbourne in this lockdown.
The lockdown was also particularly long. At this stage, it is uncertain when the current restrictions will end.
Melbourne entered the lockdown at a time when there was no vaccine and the Australian economy was just beginning to recover. The current lockdowns are coming at a time when Australia is slowly being vaccinated and the economy is booming.
The real estate industry is adapting more quickly to changing circumstances including moving to virtual inspections, online auctions and fewer people at open homes.
The biggest certainty we have around the lockdowns is that properties for sale will decline and that at the end, we will see a jump in listings post lockdown. Depending on how long this goes for, we could be in for the strongest spring on record when measured by properties available for sale.