HomeBuilder drives Vic sales to top June 2018 high

Up to 90 per cent of buyers over the quarter were owner-occupiers, and 77 per cent of those were first home buyers, illustrating the impact of HomeBuilder in bringing new purchasers into the market.

According to RPM CEO Kevin Brown: “What has been the toughest quarter in terms of restrictions that resulted in the effective closure of real estate for weeks on end has actually driven a record quarter, demonstrating the resilience of the property market in Victoria.”

“As confidence returned and restrictions looked to ease, pent-up demand drove strong results underpinned by the HomeBuilder grant. But what has been encouraging is the number of people buying without the grant, motivated by the once in a generation market conditions that make it an opportune time to buy if you are in a position to.”

Over the quarter, Victoria saw significant challenges, with Melbourne moving into its tough lockdown in July. This was reflected by monthly gross sales declining by 17 per cent to 1,696 lots in July from a peak of above 2,000 lots the month prior, and a further 21 per cent to 1,338 lots in August.

Pent-up demand emerged at the start of September as restrictions began to ease and economic conditions started to stabilise. Gross lot sales rebounded to escalate by 14 per cent in September to 1,532 lots.

This saw developers respond quickly and release more stock, with new land releases more than doubling in the September quarter to 4,511 lots, the report said.

Moving forward, Mr Brown predicted a flurry of activity in the market for the rest of the year as buyers seek to take advantage of the remaining months of HomeBuilder.

However, there would need to be careful intervention to continue to drive confidence when HomeBuilder ends and banks cease mortgage deferrals, as well as the end of JobKeeper and continued border closures halt migration.

“If this past six months has had a lot of uncertainty, the next six months will bring even more uncertainty as we don’t know how the market will respond without safety measures such as HomeBuilder and mortgage deferrals in place,” he said.

“Careful management of the headwinds coming is necessary to smooth the transition from HomeBuilder to a more stable market where buyers can continue to move with confidence. Government support is a must if we are to continue on this trajectory.

“Without government incentives in place, the pressure will be on developers to meet the market in 2021 until confidence is restored mid-year by the proposed vaccine and borders reopen to select countries to stimulate immigration again.”

Daniel Gradwell, associate director for property at ANZ, added that the extent of the rebound in other capacity city markets created optimism for Melbourne’s recovery, providing it was managed carefully with government support.

“Outside of Victoria, employment is down just 1 per cent from pre-COVID levels. Encouragingly, Victoria has already recovered all of the jobs lost during lockdown 2.0, although there is still a long way to go, and government support will remain critical to support spending patterns and see Melbourne’s post-lockdown recovery continue.”

“Nationally, employment recovery has stalled, so it’s going to be a long and slow road ahead. Government support remains critical to influence spending patterns and see Melbourne move into recovery mode following its lockdown,” Mr Gradwell noted.

Resilient market

Through the year, Victoria has proven its resilience by the lack of predicted falls in the established housing market.

In fact, RPM found that property prices in Metropolitan Melbourne have remained largely level with minor falls. House prices have decreased by 1.7 per cent from $861,000 in the previous June quarter 2020 to sit at a median price of $846,000 in the latest September quarter, representing a drop of $15,000.

Meanwhile, units in Metropolitan Melbourne recorded a 0.2 per cent increase in median prices, from $621,000 the previous quarter to $622,500 currently.

“While there is likely some additional falls to come over the next six months, the likelihood of a substantial fall as was predicted at the start of the year is all but gone. This is good news for second and third home buyers who will help to drive a recovery in 2021,” Mr Brown said.

Regional opportunities

The effect of HomeBuilder on land sales has been undeniable, bringing many renters and people living with their parents into the market for the first time, while also driving house and land package sales over the traditionally growing townhome product type favoured by young buyers, the report stated.

Still, investor activity is expected to remain at lower levels for the remainder of the year as investors try to recover from high vacancy rates, particularly in apartment markets across inner-city areas.

Mr Brown said that investors might find positive returns in regional areas where housing has performed well recently.

“Housing in regional Victoria has performed tremendously well. Long-term, we can see increased demand for commuter cities such as Ballarat, which may put pressure on councils to release land faster than they could have anticipated at the start of this year.”

Regional Victorian house prices gained a healthy 5.1 per cent over the quarter and are up 7.0 per cent from the same quarter a year earlier.

With regional houses having been largely shielded from the direct impacts of the pandemic, local developers are now looking actively at regional sites in addition to Metropolitan Melbourne.

Many developers are moving to restock their pipelines after selling through titled stock due to the HomeBuilder incentive, according to the report.

In fact, RPM transacted more than $100 million in assets in the quarter, which ultimately reflects a highly competitive environment for land parcels.

“Land is now seen as a prime investment class and diversification strategy for many investors who have vacated office, hotel and high-density residential, and it’s likely the Victorian land market may even move through this period as the best-performing asset class,” Mr Brown concluded.