The latest findings come from Riskwise Property Research. Source: Maximillian Conacher from Unsplash.
  • Riskwise Property Research report expects a sharp rebound in the Victorian housing market.
  • Strong buyer sentiment and low interest rates to boost housing market over the next year.
  • However, some areas still remain high risk, particularly oversupplied areas.

Marking the end of the COVID-19 pandemic, strong buyer sentiment in Victoria is projected to boost the housing market, delivering 8 to 12 percent capital growth over the next year, according to the latest quarterly Risks & Opportunities Report from Riskwise Property Research.

CEO of Riskwise Property Research, Doron Peleg said that the recovery was broadly in line with what had been projected by the research house late last year.

“Historically there has been a strong correlation between movements in interest rates, investor activity, and property price growth, and as we forecast last year, the correlation will reassert itself this year leading to strong price growth in Melbourne, and some of the regional Victorian markets, especially for family-suitable properties.”

Co-founder of property buying services company, Pete Wargent also confirmed that buyer sentiment was turning around rapidly.

“We’re seeing plenty of buyers who put their searches on hold in 2020 suddenly rushing back to buy. Stock levels are very low and auction markets in particularly are very competitive.”

House price expectations have risen sharply in the past 4 months by almost 32 percent, reflected in auction clearance rate results of 83 percent in Melbourne for the last week of January 2021. The average preliminary clearance rates for houses during the last week of the same period was 84 percent while for units it was 78 percent.

The report says that due to low availability of stock of quality assets in popular areas across Victoria, double-digit growth is likely for parts of Melbourne and in popular regional areas over the next year.

However, some areas carry short-term risk due to high supply and lower than expected population growth. The report cites West Melbourne as a prime example, with an additional 18,829 houses expected over the next 2 years, an uplift of 8.8 percent of the established dwelling stock.

Regarding units, the report details distinctions between family-suitable apartments and units in popular areas with limited supply, to areas with a high supply of rental properties.

It was found that family-suitable apartments that are an affordable alternative to houses are likely to enjoy good demand and solid price increases.

However, rental units in high supply areas present a high risk. Again being a prime example, West Melbourne currently has 4,267 units in the pipeline, an 8.4 percent increase to the current stock, along with Melbourne – Inner East and Melbourne – Inner to have 4,523 units (7.2 percent increase) and 11,579 units (4.7 percent increase) respectively. These areas are expected to become less attractive than houses.

Another factor increasing the risk in high supply areas is the uncertainty surrounding external migration and the fall in internal migration due to the state’s lockdown policies. However, these risks are expected to be mitigated over time with increased population.

So while buyer sentiment has certainly improved, investors still realise the other risks associated with high supply areas, including price movements, construction defects, and high vacancy rates.

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