A large amount of property deals in Melbourne recently shows developers are betting on things in the sector going back to normal regardless of Covid and Melbourne going into second lockdown.
Speaking to Real Estate Agents and property experts and analysts, price falls so far have been modest to say the least, only taking values back to 2019 levels.
Jobs and migration are set to remain weak for some time to come, driving property prices going forward.
Here are just some of the current deals going through in the Melbourne landscape
1. Specialist real estate investment bank Gersh Investment Partners, who just helmed a $53 million deal to develop 1,500 new homes at Donnybrook on Melbourne’s northern fringe.
2. In the inner city, where developers Mirvac and Milieu will construct 500 homes in Brunswick in a build-to-rent project scheduled for completion in late 2024.
This is what Jason Goldsworthy, national manager of build-to-rent for Mirvac, had to say.
“We really see COVID as a bit of a speed bump not dissimilar to the dip in the market of about two years ago”
“We’ve got another 1,000 apartments being delivered in Victoria under this same model.” The nation’s largest super fund, AustralianSuper, revealed in June it had invested in developer Assemble Communities, which specialises in similar developments and is constructing almost 200 apartments in Melbourne’s inner city.
SILVER LINING BUT STIMULUS GOING AWAY
“COVID has not created anything,” Zelman Ainsworth, one of the most prolific dealmakers in the country, said.
“But it’s accelerated everything.”
Retailers are changing the way they approach need for space.
COVID-19 clauses are now appearing in contracts. Changes in how many people stores can have in place or ongoing lockdowns, can impact rents.
Real Estate Agents however are seeing a modest decline in house prices across the nation. Basically prices may be falling back to the 2019 prices and in very small parts of the market.
There are concerns however with the Jobkeeper wage subsidy being wound back, and the reduction in Jobseeker, as well as the end of mortgage loan holidays from the banks. Things could get a lot trickier come March 2021 as we see less stimulus from the government, and less support for the businesses and workers. We can expect to see Lenders expecting distresses borrowers to return to their payment schedules and this is where we could see more sales coming to the marketplace as people start to default on their loans.
“As we do see less stimulus, or less support for workers and for business owners, and then we see lenders expecting distressed borrowers to return to their payment schedules, this is where we could expect to see more urgent sales coming on the marketplace,” Mr Lawless added.
GROWTH WILL ONLY COME WITH CONSUMER AND BUSINESS CONFIDENCE
Three of the key drivers of property prices and property development, tend to be:
a) Interest rates
b) Unemployment rate
c) Population growth
1. Interest Rates
Interest rates are at record lows, which is an advantage for real estate prices.
2. Unemployment
Remains very high with people struggling to find work, and an antidote for Covid-19 a long way. This is a very disturbing statistic.
3. Population Growth
Housing surges with Immigration, and it is currently down and this is a major concern.
Without it businesses will not have the confidence to invest, to create a pipeline of work in Victoria,” Ms Hunter said.
