Opportunities aplenty for sellers of entry-level properties in Melbourne
Owners of entry-level residential properties are enjoying one of the most attractive selling markets seen in Melbourne for years.
First home buyers and property investors are heavily targeting sub-$750,000 properties and the tempo of buying activity is set to intensify from July.
The Victorian government will abolish stamp duty for first homes valued at up to $600,000 and offer stamp duty discounts on properties that meet the same criteria priced up to $750,000 from the beginning of the month.
Many first-time purchasers have held back from putting in offers for properties in recent months so they can make the most of the new stamp duty concessions once they apply to sales transacted when the government concessions kick in.
Nelson Alexander’s sales director Arch Staver says the company’s 16 sales offices are seeing a bigger pool of first home buyers coming into the market because of the changes.
“This should drive up competition for the lower end properties,” he says.
“We’ve seen dozens of prospective sellers of sub-$750,000 properties delay going to the market in the first half of the year. That’s because these property owners, quite rightly, recognise that their opportunity to sell at a higher price will ratchet up from July 1.”
Domain Group chief economist Andrew Wilson says Melbourne’s residential market is tracking well ahead of its performance level of a year ago.
He says the potential for increased buying of entry-level properties is the “X-factor” in the current market.
He believes if there is a surge in buying by first home buyers and continued strong levels of activity by property investors, it will make the normally quiet winter and early August markets far more upbeat.
“The Melbourne market is still quite strong. It is clearly the strongest residential real estate market in the country now and we are awaiting July 1 with interest,” Dr Wilson says.
From July 1, stamp duty will be axed for all properties that cost less than $600,000.
“With the change in stamp duty charges, we should get a wave of first home buyers running into the market. That will, of course, bring a different dynamic. There may not be the normal winter hiatus in Melbourne’s market this year”.
Domain Group auction data shows that lower priced suburbs are out-performing higher priced areas.
Through May and June there were auction clearance rates of around 85 per cent in areas favoured by first home buyers, especially in Melbourne’s north and north east.
From July 1, stamp duty will be axed for all properties that cost less than $600,000.
There will also be discounts for properties worth between $600,000 and $750,000, regardless of whether they are new or existing homes.
Premier Daniel Andrews says the discounts are expected to save 25,000 first home buyers about $8000 a year.
Many first-time buyers, without stamp duty to pay, will be able to borrow an additional $100,000 to fund purchases, Dr Wilson notes.
Interest in investing in residential property has been at an all-time high over the past two years. By contrast, confidence in the share market has not yet returned to the levels seen before the 2008 Global Financial Crisis which wreaked havoc on the wealth of smaller investors.
For many small investors, the share market has operated like a roulette wheel since the GFC. Little wonder that thousands have turned to the relative safe haven of residential property.
Mr Staver says the inner and middle-ring suburbs of Melbourne are seeing reduced stock levels, both for entry-level properties and more expensive houses and apartments.
“Buyers haven’t had that much to choose from,” he says.
“The reporting of auctions on a weekly basis confirms that auction numbers in the key sought-after locations are down. But there are not as many properties being offered as in comparative years.”
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