The big test

2023 was meant to be a grim year for the property market. Many pundits predicted prices to come off by 10, 15 or even 20 percent. 

Some analysts and journalists are still hammering on about the impending mortgage rate cliff, which is yet to materialise in any substantial way, at least in our market. Although that story has a while longer to play out.

Yet in spite of the most aggressive interest rate hiking cycle in Australia’s history, prices have gone up this year all around the country. In Melbourne this has been led by our area – the inner east. 

The top end of town always leads the charge, with prices coming off quicker and harder in a downturn, and rising faster and further in an upturn, compared to the median Melbourne property.

Clearance rates have remained stubbornly high all throughout 2023 thus far, averaging above 80 percent across Jellis Craig’s 33 office network. 

On Saturday we saw an 85 percent clearance rate across 68 auctions. 

However, volumes have also been well below the long term average all year… 30 – 40 percent by my estimate for homes in Stonnington. 

The denominator is important. 68 auctions is not that many. A busy auction weekend should see between 100 – 150 auctions for our business.

So the biggest question is, can the market hold up if volumes increase by 50 to 100 percent?

This is the big test. 

And stock levels are finally improving. Buyers are commenting that there’s more choice. Agents are finally busy again with active and upcoming listings. 

This is the busiest we have been in over a year. 

So I wouldn’t be surprised if clearance rates dip in the coming weeks and months as volumes increase. 

I wouldn’t be surprised if the number of three, four or five bidder auctions decrease compared to what we have seen so far this year. 

Quality homes, well renovated homes, and detached period homes in good streets will continue to be very competitive. They always are. 

We will see some record prices this spring for exceptional homes, outstripping even the strongest results of 2021. We are already seeing this.

As a buyer you now have to factor in a substantial premium for fully renovated homes, in line with the massive increase in building costs over the last three years. 

We don’t expect many bargains or distressed sales. But savvy buyers should be able to find some value. Particularly those willing to do work. 

The long term outlook for Melbourne’s property market is bullish. Predicted to be Melbourne’s most populous city by 2032, there will be huge demand for housing just as we see a severe shortage of supply and new developments in the pipeline. 

With Stonnington’s strict planning codes and much of our municipality protected by heritage and neighbour character overlays, new developments are largely limited to apartments on main roads. And not everyone wants to live in an apartment on a main road.

Established homes – particularly period houses – are a finite resource. If you can get your hands on one now you should be in very good stead for the years to come in terms of capital growth. 

‘Land, land, land’ might become the new maxim, along with ‘location, location, location.’ 

We may well look back on 2023 as the start of a strong run on Melbourne property prices that could last for many years. Time will tell. 

The Report 2023 is out now. Your annual insight into the factors shaping the residential property market in Stonnington and the wider Metropolitan region. 

To read the 2023 edition of The Report, click here or get in touch to have a printed copy sent to you.

Feature property: 40 Maitland Street, Glen Iris