The Coronavirus lockdowns have had a massive impact on the economy with many industries being shut down including the property market. Due to recent Coronavirus restrictions in Victoria, which were amongst the strictest in the world, the Melbourne property market completely shut down.
The introduction of Victoria’s stage 4 lockdown on the 2nd of August meant that the property market was effectively placed on hold due to industries being shut down and people were only permitted to leave their homes to shop or exercise within 5kms of their home, all non-essential businesses were closed which meant that people could only go to the supermarket or buy takeaway coffee or food from cafes or restaurants.
The restrictions meant that the Melbourne property market effectively came to a standstill. Physical home inspections were banned at the height of the restrictions meaning that they could only be conducted online.
Before the stage 4 lockdown was introduced in Victoria, the Real Estate Institute of Victoria (REIV) anticipated that there would still be some sales transactions take place during the lockdown however it was unlikely that new properties would be listed because people do not purchase properties that they haven’t physically inspected. Even though they could do an online inspection actually agreeing to buy a property was unlikely which would see the number of Victorian property transactions dramatically decrease.
The stage 4 lockdown also prevented people from moving unless they had already signed an agreement to do so. If they had signed an agreement before the restrictions then people with plans to move homes could only do so between the curfew hours which were 5am until 8pm. People were unable to relocate outside of those hours though.
In addition to physical real estate inspections being halted during the stage 4 lockdown, auctions were only banned unless they took place online.
The REIV did lobby the Victorian state government to ease the restrictions, especially given that anyone who played a role in the provision of shelter should be deemed an essential service. At the start of the stage 4 restrictions on the 2nd of August the REIV expressed concerns that due to the initial Coronavirus restrictions many people had lost their jobs, leaving them displaced and in a position where they needed to search for cheaper accommodation. The consequence of the introduction of a stage 4 lockdown on the 2nd of August was that people would be unable to inspect properties, making it impossible to sell or lease properties.
They were worried that activity would dramatically decease and that real estate agents would be amongst workers who were struggling with their business as a direct result of the Coronavirus pandemic.
The Real estate industry has been worried that the restrictions went too far and would have serious repercussions for buyers, sellers, renters and of course, agents. Despite the property market shutting down during Victoria’s stage 4 lockdown there were hopes that the property market would later rebound once the economy opened up again and property inspections could recommence.
The restrictions related to real estate inspections were lifted on the 28th of September which has meant that property inspections can take place again. There are still restrictions on property inspections however, with the time limit for private inspections being 15 minutes. During property inspections only one agent and one potential buyer or tenant (and their intimate partner, or household member) is allowed. Although Melburnians can inspect properties, they can only do so within Melbourne. They cannot however travel to regional Victoria to inspect properties if they’re planning to relocate. The lifting of the restrictions is good news for the property industry because it was originally anticipated that physical property inspections would be banned until the 26th of October at the very earliest.
Although property inspections have recommenced with limited numbers allowed to physically inspect the property, auctions must still be conducted online. Both buyers and sellers are relieved that the property restrictions have been lifted because the lockdown had major consequences on their lives. Before the stage 4 lockdown was introduced, there was one Melbourne family that had sold their property during the stage three lockdown and the four of them were forced to live in one bedroom at a family member’s house because they could not inspect properties to rent or buy.
Other people who were caught up in the COVID-19 stage 4 lockdowns were worse off than this particular family as they had agreed to purchase a property but weren’t able to sell their existing property because of the restrictions so they were forced into a situation where they had to take out a bridging loan.
Another couple who was expecting their first child were forced to sell their property because one of the mortgage holders had their hours cut because of the COVID restrictions. As government support in the form of Job Keeper and Jobseeker are cut, combined with mortgage holidays ending it is expected that more people will have to sell their properties, however despite the economic consequences of the COVID pandemic the property market has held up pretty well. Very few people have been forced into mortgagee sales. This is despite reports in June suggesting that more than 1.4 million Australian households have been forced into mortgage stress and 100,000 mortgage holders being close to defaulting on their loans.
Renters have also been forced into rental stress which in turn has put property investors under stress, with 12% of investors in June saying that they would consider selling their property in the next 12 months. Renters have been forced rental stress because even though some properties are vacant they can’t inspect them and therefore they are unable to relocate to a property within their budget.
With more mortgage holders under mortgage stress due to tenants not being able to pay their rent or negotiating lower rents that could mean mortgagee sales when the government support is tapered down. If there is an influx of mortgagee sales could see property prices in the Victorian capital of Melbourne plummet as more properties come onto the market. At the start of September, Melbourne property prices had falling 5.1% by the start of September, with economists predicting that Melbourne prices could fall up to 15%. There is particular concern for off the plan apartments in Melbourne CBD due to higher vacancy rates and people not necessarily returning to offices in Melbourne’s CBD as a result of different workplace habits where people can now work from home rather than going into the office. Because people can work from home there is less reason for people to live close to traditional CBDs because they can work from home and therefore live more rural.
With the Melbourne property market fluctuating as a result of the COVID pandemic there has never been a better time to buy a property, and Homely has up-to-date listings of properties for sale. If you’re thinking of buying, selling or simply want to know the value of your property to know how much equity you have in it then give us a call on (03) 9021 2007 to discuss your property valuation needs.