May 2024 Newsletter
HEY NEIGHBOUR!
Welcome back to another edition of our monthly newsletter. I returned from a week away in Bali where I was able to experience a new culture with my beautiful family. Food was amazing, not sure that I liked all those vespas and motorbikes but survived the crazy driving. Beaches and sunsets were a must so in between working a little, was able to reset and refresh (and get a great tan) while keeping one eye on things back in Melbourne – how far we’ve come with technology! One of the good things post COVID – we can work from anywhere in the world.
With the release of the Victorian budget, we have some worrying numbers regarding the debt the government has taken on and it looks like some of the major infrastructure projects and hospitals will be shelved for the time being – another government to have broken their promise for the Melbourne Airport Rail project, will it ever happen? and do we really need it?
No major decisions that will effect residential real estate, however “the government has made a new $700 million investment in the Victorian Homebuyer Fund shared equity scheme for 2024-25 before the Fund is phased out and replaced by the federal government’s ‘Help to Buy’ initiative (should it pass Federal Parliament)”. Looks like they understand they have pushed the envelope too far so no new taxes or levies in this year’s budget, which is a first in a few years!
Here is a quick summary of the budget prepared by the Property Council of Australia:
What you need to know about the Victorian state Budget
I hope you enjoy our articles below.
Have a great weekend from The Neighbourhood team and Happy Mother’s Day to all the mums out there!
Carmela
MARKET INSIGHTS
We strive to stay up to date on the latest market trends. Here are a few articles we think are worth reading.
- Why Melbourne's property market is lagging behind other capital cities (domain.com.au)
Key takeaways from the article- Melbourne's Divergence from Other Capitals: Unlike its historical trend of mirroring Sydney's property market, Melbourne is now experiencing a softening market while other capitals continue to witness price gains. This divergence is evident in Melbourne's median house price, which trails significantly behind Sydney's, and in its subdued property landscape compared to cities like Canberra and the Gold Coast.
- Factors Behind Melbourne's Softening Market: Westpac senior economist Matthew Hassan attributes Melbourne's market softening to land tax increases for investment properties, which likely deterred investors and led to increased listings for units. Additionally, Melbourne's rental vacancy rates are not as tight as in other capitals, and the state economy is relatively softer. These factors, combined with cautious buyer behaviour stemming from the pandemic, have contributed to Melbourne's subdued property market.
- Future Outlook and Potential: Despite its current underperformance, analysts like Bank of Queensland chief economist Peter Munckton believe Melbourne offers fair value and expect prices to pick up, eventually outperforming the national average. Dr. Nicola Powell predicts that Melbourne will eventually be perceived as undervalued compared to other cities, presenting a unique opportunity for buyers amidst a subdued period of price dynamics.
- Australia rental crisis: Unit rents soar almost 50 per cent from March 2020 (theage.com.au)
Key takeaways from the article- Rapid Rent Increases: Since the lows experienced during the COVID-19 lockdowns, rental prices have surged dramatically across major Australian cities. Unit rents have seen significant spikes, with Sydney and Melbourne experiencing increases of nearly 49%, while house rents also surged, particularly in Brisbane, Perth, and the combined capitals.
- Factors Driving Rent Hikes: Experts attribute the sharp rise in rents to various factors, including a persistent shortage of properties, shifting living arrangements post-pandemic (such as moving out of share houses into smaller households with home offices), and a decline in the construction of public housing over the long term. This scarcity of housing options, coupled with increased demand, has driven rents higher.
- Challenges and Solutions: Economists warn that high rents could exacerbate inflation and deter investors, further straining the housing market. While behavioural changes post-pandemic, such as fewer people per household and a preference for houses over units, have influenced rental demand, addressing the housing supply shortage through increased construction, particularly of units, is seen as crucial to stabilizing rents in the long term. However, immediate solutions, such as incentivizing investors, may face political hurdles.
- Australia property: Average home deposits soar as wealthier buyers step into the market (theage.com.au)
Key takeaways from the article- Record-High Home Deposits: The average home deposit in Australia has surged to over 32%, marking a historic high. This trend indicates that purchasing property has become increasingly unattainable for the average Australian, presenting a significant hurdle to homeownership.
- Shifting Buyer Dynamics: Analysis from investment bank Jarden reveals that buyers with the highest deposits are now taking out the smallest loans relative to the purchase price, reaching unprecedented levels. This suggests a divergence in the buyer pool, with those capable of providing higher deposits less reliant on bank financing.
- Challenges and Implications: Rising house prices amidst a high-interest rate environment have confounded economists, as traditional correlations between prices and borrowing capacities have become less apparent. The trend underscores the growing disparity in wealth among homebuyers, with wealthier individuals exerting significant influence on the housing market, driving prices higher and exacerbating affordability challenges for others.
- Melbourne property: Gap between house prices and apartment prices blows out (theage.com.au)
Key takeaways from the article- Record Price Gap: Melbourne's housing market has seen house prices outpace unit prices over the past decade, resulting in a record-high price gap. The median house price now stands at $1.03 million, while units average $564,095, leaving a substantial $467,925 difference.
- Barrier to Upsizing: This widening gap presents a significant hurdle for buyers looking to upsize from units to houses. Many find themselves feeling like they're starting from scratch due to the substantial financial leap required, delaying decisions like starting a family.
- External Assistance and Alternative Options: To bridge this affordability gap, buyers are increasingly turning to external sources, such as family assistance, to bolster their borrowing capacity. Some are even exploring options outside Melbourne's CBD, where prices may be more within reach.
- Editorial: Allan government should delay Suburban Rail Loop to address Victoria’s mountainous debt (theage.com.au)
Key takeaways from the article- Victoria's Escalating Debt: Despite previous indifference towards escalating debt levels, the reality of Victoria's substantial debt, projected to reach $187.8 billion by mid-2028, is now starkly evident. Treasurer Tim Pallas's recent budget highlighted the pressing need for fiscal responsibility, as interest payments alone are projected to cost $25 million per day, emphasizing the importance of addressing the debt burden.
- Impacts on Families: The budget's attempt to provide relief to families, such as offering $400 to school students' families for start-of-year expenses, is overshadowed by the state's debt burden. Measures like delaying promised childcare programs, cutting off shared equity home buying schemes, and scrapping sick pay for casual workers underscore the challenges faced by Victorians due to escalating debt.
- Balancing Fiscal Discipline and Economic Growth: While the government acknowledges the need for fiscal discipline, achieving debt reduction without compromising jobs and economic growth is a delicate balance. Despite a slight projected reduction in net debt as a proportion of the economy, The Age suggests further measures, like delaying major infrastructure projects such as the Suburban Rail Loop, to alleviate the state's financial strain and ensure a functioning economy for future generations.
COMMUNITY BULLETIN BOARD
What's new in your neighbourhood? These are a few recent updates that are happening in some of our local communities.
- Korea Festival (10 - 11 May)
- Mother's Day Classic (12 May)
- Melbourne International Animation Festival (Until 12 May)
- Melbourne Design Week (23 May - 2 June)
- Good Food and Wine Show (31 May - 2 June)
- The Long Walk: Naarm 2024 (25 May)
CAUGHT OUR ATTENTION
Here are a few things that members of our team have stumbled across over the month. Whether thought-provoking, interesting or entertaining, we want to share them with you.
