House prices in Stonnington have gone up recently.
By my reckoning, house prices in our market peaked in October 2021, eased for about 16 months, and then started rising again in Q1 2023.
Buyer demand started abating as soon as our final COVID lockdown ended, and really plummeted when the RBA commenced the aggressive rate hiking cycle in May 2022, as buyers decided to sit back and wait to see how high rates would go, and the impact this would have on property prices.
In Q3 and Q4 of 2022 our market all but ground to a halt. Prices didn’t take a nosedive, but certainly eased.
Competition was thin and most sales occurred via private negotiation with just one buyer. It became rare to have multiple offers / bidders.
Commensurately, stock levels started falling as rates rose. Many potential vendors decided it was not a great time to sell and held back. Volume dwindled.
Homeowners who would have otherwise been ready to upgrade put their plans on hold, partly because there haven’t been many properties for them to buy, and partly because their borrowing capacity has taken a huge hit.
And for those owners still on exceptionally low fixed rates, why would you give up a two-percent mortgage to go and commence a new loan at five or six percent?
The low volume has continued well into 2023, with the number of established homes transacting in Stonnington down by as much as 50 percent in FY 2022/23 compared to 2021/22.
Yet, in spite of the most aggressive rate hiking cycle in our history, it appears that we hit an inflexion point in late 2022.
Demand started to ramp up again from the beginning of 2023.
Perhaps buyers decided that interest rates were hopefully nearing their peak. Or perhaps people were sick of putting their plans on hold and decided to get on with their next move. Or perhaps record immigration into Melbourne has created a new contingent of buyers.
Or perhaps it’s mainly supply driven.
Stock became so tight that the current buyer pool is more than deep enough to absorb such little volume and to even put upward pressure on prices.
Either way, straight out of the gate in 2023 clearance rates jumped substantially. At Jellis Craig across all 33 offices we have averaged above 80 percent clearance in the first six months of this year.
Most of our auctions have seen multiple bidders. Homes are selling significantly above reserve again, reminiscent of the boom markets of 2016/2017 and 2020/21.
Motivation has returned.
Potential vendors are realising that selling conditions are very good right now, with plenty of buyers fighting it out over very limited stock.
Buyers are realising that the banking analysts have got it wrong yet again, and a 20 percent market correction is not going to eventuate. And in fact, we are most likely past the bottom.
So where to from here?
While we can’t speak for all agents, early spring is looking very positive for Team Fetter/Sciola in terms of our new listings and pipeline.
We have some fabulous properties that will hit the market in the coming weeks, with a nearly full bill of auctions already scheduled for August and early September.
We expect that the appetite from buyers – long starved of stock – will remain strong, particularly for quality homes.
Competition will be fierce for the top tier properties at all price points. Fully renovated homes will outperform unrenovated ones.
Hopefully, there will be a lot more choice for buyers this spring compared to last.
Feature Image: ‘Armadale House’ by Selzer Design Studio
David Sciola 