Property value is not static, but rather fluctuates alongside the market conditions. In times where the real estate market has dipped, this will also be reflected in your property value, as it is based what you could reasonably expect to sell your property for in the current free market.
COVID-19 has created a large amount of instability in the Australian property market, and particularly in Melbourne where long lockdowns were enforced throughout 2020, and in periods of 2021 as well.
During 2020, the property prices in Melbourne saw a significant drop, with some suburbs having as much as a 20% decline in median sale price. This decline started early in March alongside the initial lockdowns, and reached its lowest point mid-year.
However, the property market in Australia has seen a widespread upward trend, with prices in most areas increasing above pre-pandemic rates. The Melbourne property market has followed this trend, peaking again in late 2020 and following into 2021 with rising prices in 91% of suburbs.
The wide alternation in property values during the COVID-19 pandemic was influenced by a range of factors.
A large impact on property values in Australia in the beginning of the pandemic was the economic uncertainty. With increased unemployment levels, the number of potential buyers decreased.
This lack of demand for properties meant many houses were on the market for much longer than usual, prompting owners to reduce prices in order to sell.
Rental stress due to unemployment or financial insecurity also lead to many investors considering selling their properties. The influx of these properties into the real estate market also contributed to the downturn in median property value.
The combination of financial uncertainty for many individuals and the lowered demand from buyers meant that property values lowered across the board, both in Victoria and the rest of the country.
The lockdowns implemented across Australia had an effect on the property market overall, as they meant that property inspections and auctions weren’t allowed, or were limited in numbers.
These restrictions slowed down the number of sales possible during 2020, in particular for Melbourne.
The lockdowns in Melbourne may have been responsible for the 2.3% drop in median house value over the June 2020 quarter, a larger drop than any other capital city.
Melbourne had much longer lockdowns during 2020 than other major cities, and after entering Stage 4 restrictions in early August, all in person real estate inspections were banned.
These restrictions lasted until the end of September, meaning for a two month periods no inspections were able to happen. This meant renting or buying a property was made much more difficult, deterring many prospective buyers.
Once these restrictions were lifted, and the overall lockdown eased in Melbourne, there was a significant rise in property value across the majority of suburbs.
Due to the changes that COVID-19 brought to daily life for all Australians, there has been a rise in interest in lifestyle focused suburbs. The demand for coastal properties near to capital cities has risen across the country.
These changes can be seen in the Melbourne property market, with the coast suburb of Portsea having a 34% median price increase in house value in 2020 compared to 2019. Nearby suburbs of Tyabb and Safety Beach also had significant rises of 28% in median house price and 26% in median unit price respectively.
The changes in lifestyle focuses have also created a decrease in value in some areas, particularly inner city investor markets. This is due to the reduction of local and international students who make up a large percentage of renters in the Melbourne CBD.
The lack of renters creates a subsequent effect on sale prices, as the demand from investors looking to buy in these suburbs has decreased.
Low Interest Rates
As a result of the COVID-19 pandemic, following lockdowns, and increased economic turbulence, the Reserve Bank of Australia introduced a lowering of interest rates.
This has increased the interest from first home buyers and investors, and allowed for a greater level of confidence in the shifting property market. As a result of this, property values have also increased.
As property value is dependent on healthy market demand, the low interest rates are working to push up median property value in all areas of Australia but specifically capital cities like Melbourne.
While market conditions and therefore property values have been constantly changing throughout the COVID-19 pandemic, it has created some unique opportunities for both buyers and sellers.
If you are considering selling or purchasing a property and taking advantage of the current market conditions, you will require a property valuation. Reach out to our team today for expert and specialized service.