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Right Now In 2023, The Melbourne Property Market Is Experiencing ‘A Perfect Storm’ Of Buying Opportunities For Educated And Market Ready Investors!
These are the following reasons why NOW is the Perfect Storm!
1. Chinese buyers return to Australia’s housing market and snap up properties, sparking fears prices could rise even further! Foreign buyers are returning to the Australian property market; the fear is, they could drive up the cost of homes for Aussies already struggling to buy one.
China was the largest source of investment for residential real estate investment proposals by number and value ($0.6 billion), as it was in 2021-22 and 2020-21. The next two largest sources of residential investment were Hong Kong ($0.1 billion) and Vietnam ($0.1 billion).
The investment figures that were recently released by the Australian Government’s Treasury, in its Quarterly Report on Foreign Investment, cover the last quarter of 2022.
Total foreign investment in Australia fell sharply but Chinese buyers remained the most significant, with $600 million of approved investment, even though that was down $1 billion.
With Hong Kong investment included in the Chinese total, Chinese investment this quarter accounted for $700 million of Australian property. After China, the next largest investors were Vietnam, Singapore, and the United Kingdom, each of which invested $100 million in residential real estate.
In this quarter, the largest target sector for proposed investment for the quarter by value was commercial real estate, with a total value of $19.3 billion.
The United States was the largest source country for commercial investment proposals by number and value ($16.7 billion), as it was in 2021-22 and 2020-21.
The next four largest source countries by value were China ($6.7 billion), Singapore ($5.2 billion), South Korea ($4.2 billion), and Canada ($3.8 billion).
While the overall numbers are down, the return of Chinese students to Australia, an end to pandemic travel bans, and warming relations between the two countries, are driving a rise in property inquiries from China.
Juwai IQI Co-Founder and Group Managing Director Daniel Ho said that at the current rate, China would invest an estimated $3.2 billion in Australian residential real estate this year, which would be up from $2.4 billion in 2021-22.
With the inclusion of Hong Kong, China would invest $3.8 billion, which would be up from $3 billion last year.
“In 2022 and so far this year, Australia is the most popular country for Chinese homebuyers, for the first time ever, according to Juwai IQI Chinese buyer enquiries,” Mr Ho said.
“In January, Chinese buyer inquiries for Australian real estate surged by 24 percent compared to December, due to the announcement that borders would be reopening.” The latest data from national removalist booking platform Muval has revealed Australians are continuing their exodus from Sydney, looking strongly in favor of Melbourne.
2. Inbound inquiries show the laneway capital remains streets ahead of the rest according to the platform; Melbourne was the most popular city to move to in 2022, with the February figures showing the city accounted for the most eyeballs. 28% of all major metro inbound moving inquiries were for Melbourne. This is an increase from last January when Melbourne accounted for 24%.
3. Melbourne homeowners are holding back from listing properties in the declining market, resulting in almost a 30 percent drop in the number of homes for sale in some regions year on year.
House hunters have fewer properties to choose from as falling property prices prompt vendors to rethink plans and some to delay selling until the market improves.
Buyers in Melbourne’s north-east have seen the biggest drop in homes on offer, as new listings in January – properties marketed for 30 days or less – were down 28.2 percent year on year. This fall was closely followed by the inner south, where new listings dropped by 28.1 percent.
The inner region was down 21.9 percent, the outer east 19.7 percent, and the west 15.4 percent.
New listings were down more than 10 percent across Melbourne, but the number of homes hitting the market on the Mornington Peninsula rose 3.3 percent.
The total number of homes for sale was also down in most Melbourne regions except in the northwest and west of the city, where numbers were up 13.9 percent and 8.2 percent respectively. In the Mornington Peninsula, they were up 27.8 percent.
4. Melbourne rents have rocketed to record highs, jumping as much as 20 percent in a year and prompting fears of homelessness and housing stress for low-income households. In fact, there has never been a tougher time to be a renter in Melbourne, where vacancy rates are just 1.4 percent and rents have hit record highs.
The median weekly cost of renting an apartment in Melbourne last week hit $450 – a 20 percent increase on 12 months earlier – while in inner Melbourne rents have reached a weekly median of $490 a week, according to the Domain Rent Report for the December quarter.
The most recent Australian Bureau of Statistics figures, taken in August, showed the median weekly income in Melbourne was $1300 (across Victoria the median was $1250). Rental stress is defined as paying more than 30 percent of one’s income in rent, meaning for a single renter on a median wage in Melbourne, anything more than $390 a week would put them in rental stress.
For houses, the median rent reached a record high of $480 and grew 7.9 per cent in the 12 months to December.
The increase comes amid growth in demand as tenants make pandemic living habits permanent and eschew share houses for their own space, at the same time as international borders reopen.
While rental increases are bad news for tenants, its great news for landlords, especially for those who purchased their investment properties in the inner east and Bayside where rental yields have increased over 16 and 17 per cent respectively, far beyond any increases in interest rates over the same time period.
5. Record Low Vacancy Rates;
6. Financial markets think rate hikes are done… now pricing is in a rate cut through the second half of the year.
In fact, I believe, that many property investors who are currently staying out of the property market will look back retrospectively and realise that November and December 2022 were in fact the lowest and most opportune times to enter the Melbourne property market from a ‘Market Timing Perspective’…