June 2024 Newsletter
HEY NEIGHBOUR!
Welcome back to our latest newsletter! My holiday is a distant memory, May has given us lots of sunshine and now we are officially in Winter! The snow season begins for all the skiers out there and we look forward to hearing about any planned trips to the mountains.
Now, turning to real estate. The rental market continues to show strength, with Melbourne's vacancy rate remaining at record lows due to limited supply, high construction costs, and strong demand for new properties. However, we are approaching the market with caution as we have begun to observe signs of a slowdown in both rental activity and property sales.
At a recent open inspection for one of our listed properties, we experienced a significant change: not a single visitor attended. This was the first time in quite a while that we encountered such a situation. Over the past 18 months, properties were almost guaranteed to be leased either immediately or before the first open inspection. However, in the last three weeks, we have observed a decline in visitor numbers. We anticipate that the mid-year student intake may boost demand in the CBD and around university campuses, but it is challenging to foresee any changes in the middle and outer ring suburban areas.
The Government is again thinking of changing the minimum standards required for rental properties – nothing is in place yet and there will be more discussion to come but this is an overview for now: Minimum Standards for Rental Properties and Rooming Houses (engage.vic.gov.au)
If you would like to have a chat about the current conditions, please give me a call.
I hope you enjoy our takeaways from the articles below. Have a great weekend and month ahead from The Neighbourhood team!
Go Blues!!
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.
- The suburbs where home owners can’t afford their mortgages (theage.com.au)
Key takeaways from the article- High Mortgage Delinquency Rates: Several outer Melbourne suburbs and the CBD are experiencing high mortgage delinquency rates, with some areas seeing over 5% of home loans in arrears due to higher interest rates and rising living costs.
- Economic Disparities and Impact: Outer suburbs, which typically have lower incomes and less diverse job markets, are more affected by mortgage arrears compared to more affluent inner suburbs. These areas are overrepresented in delinquency rates due to concentrated job losses in risky industries like construction.
- Future Outlook: The share of households falling behind on their mortgages is expected to rise further this year. However, a strong labour market and solid housing market might limit the overall impact. Interest rates are likely to remain elevated, continuing to pressure homeowners, especially those with loans taken out during the low-interest period of 2021-2022.
- ‘Investors are back’: Wary apartment developers crank up new projects (there.com.au)
Key takeaways from the article- Cautious Optimism in Development Market: After a challenging few years, there are signs of revival in Melbourne's development market, with some developers launching new projects and reporting strong pre-sales, such as Salvo's Southbank tower and Frasers and Irongate's Bradmill redevelopment in Yarraville.
- Challenges in Construction: Despite some positive developments, the construction industry faces significant hurdles, including rising building costs and hesitant financiers. This has led to a slowdown in project launches and completions, with 2023 seeing a dramatic reduction in new apartments compared to previous years.
- Market Dynamics and Future Outlook: Developers and financiers risk missing the next market cycle if they don't start new projects soon. Although there is cautious progress, with some developers like Chapter Group and Deague Group moving forward with new projects, the overall number of units under construction is set to decline further in the coming years.
- Catch 22 means 'pretty much no rental properties are affordable' in Australia - ABC News
Key takeaways from the article- Surging Rental Prices and Affordability Crisis: Rental affordability in Australian capital cities has significantly deteriorated, with only 10.4% of rentals costing less than $400 a week, down from 43.2% at the start of the pandemic. This drop is more pronounced in cities, where just 5.9% of rentals fall under this threshold.
- Demand-Supply Imbalance: Strong demand driven by high migration and limited rental supply has led to record-high rental prices, with the median weekly cost now at $627. The completion of new builds has slowed, and investor activity has not kept pace with demand, exacerbating the crisis.
- Economic and Social Impacts: The rapid rise in rental prices, with CoreLogic reporting an 8.5% annual growth rate, has increased requests for homelessness services and strained low-income households. Although there is a potential for slower rental price growth in the coming months, the situation remains challenging and could influence the Reserve Bank's future interest rate decisions.
- Environmental Audit Overlay over possible land contamination wipes '$150k' off property values - ABC News
Key takeaways from the article- Impact of EAO: Sarah and Nick Wilms are facing uncertainty after both their blocks of land in North Wonthaggi were placed under an Environmental Audit Overlay by the Victorian government. This overlay has significantly reduced the value of properties in the area and requires landowners to conduct environmental assessments before building permits can be obtained.
- Community and Political Response: About 100 residents, including Sarah and Nick, attended a rally with Victorian Opposition leader John Pesutto and other Liberal Party members to protest the overlay. Residents expressed frustration over the sudden imposition of potentially high costs and delays due to the required environmental assessments.
- Government and Council Response: The Victorian Planning Authority (VPA) applied the overlay despite earlier reports, and the Environment Protection Authority (EPA) is now involved to assess the contamination concerns. The Bass Coast Shire Council has appointed an independent environmental auditor to conduct a Preliminary Risk Screen Assessment (PRSA) to determine if the overlay can be removed.
- Inflation rises slightly in April to 3.6pc but economists say that should ring 'alarm bells' for RBA - ABC News
Key takeaways from the article- The monthly Consumer Price Index (CPI) indicator is not as comprehensive as the quarterly data but still offers a reasonable picture of price trends. For April, it included up-to-date prices for 62% of the CPI basket.
- Services prices, especially in categories like housing, fuel, electricity, health, education, and financial and insurance services, remain high and contribute significantly to inflation. The unemployment rate rose to 4.1% in April from 3.9% in March, with an increase of 30,300 unemployed people.
- Economists like Stephen Walters and Warren Hogan suggest that further interest rate hikes, while unlikely, cannot be ruled out due to the upside inflation surprise. On the other hand, Anneke Thompson and Saul Eslake predict that the RBA might not raise rates immediately but might delay any rate cuts until at least February next year.
COMMUNITY BULLETIN BOARD
What's new in your neighbourhood? These are a few recent updates that are happening in some of our local communities.
- RISING - What's On Melbourne (1 - 16 June)
- RISING: Night Trade - What's On Melbourne (1 - 15 June)
- Nocturnal: Museum After Dark - What's On Melbourne (Until 13 June)
- Arts Centre Melbourne Sunday Market - What's On Melbourne (Until 30 June)
- Pharaoh - What's On Melbourne (14 June - 6 October)
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.
