Melbourne experienced a 330 per cent increase in monthly sale listings, causing experts to examine whether there’s a rise in distressed sales or an economic rebound.
About 6974 properties in Melbourne were listed for sale as of 18 October, CoreLogic data reveals, a jump from the 1606 listed four weeks earlier.
The sudden surge in property listings -- more than any other state in the four week period, even overtaking Sydney’s 6642 -- has resulted in 21,000 properties in total being advertised for sale across the city.
“Since onsite, private inspections resumed on the 28th of September, new listings volumes have soared,” Eliza Owen said, head of research at CoreLogic.
“The result is likely due to months of pent up decisions to sell from vendors, and reflects how the real estate transaction process has remained tied to physical inspections.”
The increase in listings comes at a precarious time for Melbourne. The entire state is coming off one of the longest lockdowns in the world, contributing to a rise in unemployment and businesses shuttering.
Importantly, mortgage deferrals across the country are coming to an end for many after banks offered six months reprieve for those financially struggling.
The surge in property listings has captured the attention of economists, who are trying to calculate whether it indicates a recovery is afoot, or if it’s a sign people are struggling to resume mortgage repayments, and so they are putting their homes up for sale.
“Forced selling was a possibility from the pandemic, as significant job losses across Victoria may have limited the ability of some households to keep paying their mortgage,” Ms Owens said.
Some people will have to sell
Banks, economists and the RBA have forecast some people won’t be able to afford their mortgage repayments -- and will have to sell as a result.
Big four bank executives have spoken plainly about some struggling families having to downsize if their situations would not be improved by further relief measures.
“We will sometimes need to make the hard but right decisions,” Ross McEwan said, chief executive of NAB, before a parliamentary committee last month.
“Lending more money to customers who have little chance of repaying it will cause more harm in the long term.
“... Even though looking after customers will at times mean saying no, we will be compassionate when dealing with something as painful as selling a home or closing a business.”
Westpac’s chief economist has forecast about 60,000 homes will be sold due to financial distress as of next year, once stimulus payments wind down and deferrals end.
The RBA estimates about 15 per cent of people who deferred their mortgage won’t be able to afford their repayments.
“Some borrowers may be able to restructure their debt (such as by extending the term or temporarily switching to interest-only payments) and lower their repayments,” the RBA said, in its financial stability report.
“However, some borrowers may need to sell their property to repay their debt.”
Properties are selling, but a recovery will take time
Two metrics hint that a recovery is beginning to take shape in Melbourne, CoreLogic said, but uncertainty remains.
The first has to do with the number of properties being sold in relation to the number of them being listed. Of the properties listed in all of Melbourne, about 11 per cent sold within the four week period ending on 18 October.
“This suggests at least some stock on the market has been absorbed over the past four weeks,” Ms Owens said.
The second is to observe auction clearance rates. Melbourne’s final auction clearance rate was 60 per cent in the week ending on 18 October, according to CoreLogic.
“This was achieved alongside the highest volume of auctions seen in two months,” Ms Owens said. “It is clear that even after long, strict restrictions, vendors are keen to sell.”
But the data does not paint a complete picture, due to a lag in time between initial property listings and their sale.
“It will be a few weeks before we can understand how strong buyer appetite is,” Ms Owens said.
Property prices are down and vacancies are up
Property values in Melbourne have fallen 5.5 per cent since the coronavirus pandemic first hit in March. Together with Sydney, the nation’s two largest cities anchored a national recovery in the month of September, and continued a streak of falling property prices for five ongoing months.
Melbourne properties experienced the steepest falls in September, a drop of 0.9 per cent, attributed to the Stage 4 lockdowns instituted as a health measure in response to COVID-19. When tallied, property values fell by 0.1 per cent across the nation.
With restrictions eased, property prices are forecast to recover over the next year, but economists have warned distressed sales could slow it down.
Melbourne has also become the rental market with the highest proportion of rental vacancies in the country, according to research from Domain Group.
Its vacancy rate edged up by 0.6 per cent to 3.8 per cent in August, more than double the proportion recorded in the same month last year. It was also the only capital city that recorded a rise in vacancy rates over the past month.
The vacancy rate increase is due to empty properties in Melbourne shooting up by about 20 per cent in August, and 140 per cent in the past 12 months.