What happens in the Melbourne property market after lockdowns?

The return of one-on-one inspections for all properties, not just those that are unoccupied (which could go ahead on September 23 if COVID-19 vaccine thresholds are met), would be a panacea for the broader property market.

The pent-up demand for homes is likely to burst like thirsty Melburnians through the doors of their local pubs when the state government’s strictest of public health measures lift, data shows.

Victorian buyers and sellers reacted sharply to the end of the 15-week lockdown last year, according to Domain research.

Listings soared 292 per cent, and Melbourne’s median dwelling price climbed 4.2 per cent for the December quarter, as buyers dug deep to ink a contract after the coronavirus largely delayed their 2020 plans.

Hand-in-glove with this pop of activity was greater demand for finance and a boom in the amount borrowed, following the late-October winding back of restrictions.

Domain’s chief of research and economics Dr. Nicola Powell says she anticipates this year’s rolling lockdown to support property prices in the same way it did last year.

In 2020, prices remained stable through the thick of lockdown due to the market going into hibernation.

“There were so many forecasts on where property prices would go, and they were negative, but the reaction was that buyers and sellers waited – they waited for the road map out of lockdown,” Dr. Powell says.

“And the reaction is instantaneous once that lockdown starts to ease.”

AMP Capital chief economist Shane Oliver says the significant bounce-back could, in part, be attributed to bank payment holidays and income support for businesses and households.

“[They] protected what would normally happen in a downturn of people defaulting on their loans, businesses going bust and prices going down and staying there for a while, whereas when lockdown ended the market stabilized fairly quickly and took off again,” he says.

“I suspect that’s what you’ll see this time around again, and we’ll see it reflected in mortgage applications.

“They slowed sharply nationally through lockdowns and then were held down to some degree during the September quarter by the Victorian lockdown, and then recently, they’ve gone to record highs, but the indications are they’re still holding up pretty well this time.

“We haven’t seen the falloff we saw a year ago, which is consistent with property markets generally holding up better.”

A return of private inspections this year would be a trigger for new listings, Dr. Powell says.

In late September last year, when the first restrictions began to lift, Domain’s new listings rocketed 292 per cent compared to the previous four weeks.

By the end of October, new listings peaked 36 per cent higher than pre-lockdown. Come December, listing volumes were 68 per cent greater than the same time last year.

With more choices on the market came a jump in borrower activity. Head of consumer research at Finder, Graham Cooke, says the end of Victoria’s lengthy 2020 lockdown saw an increase in mortgages.

Finder and Australian Bureau of Statistics data tracked the trajectory of Victoria’s total number of new housing loans – starting with 7400 in January, staying relatively stable until rising to 8809 in November and peaking at 10,973 in December.

At the same time, the amount borrowed to purchase a home in Victoria hovered around $4 billion from January to October 2020 and increased by roughly 50 per cent between October and March this year. “This shows that the lockdown did not have a significant impact on borrowing, but the lifting of restrictions did,” Cooke says.

“I would predict that this current lockdown is unlikely to have a dampening effect on the housing market and may actually fuel it even further once restrictions are eased.”

Dr. Powell says Domain’s Buyer Demand Indicator, based on buyer interactions with listings, including emailing an enquiry to an agent and multiple visits to a photo gallery, which demonstrates a higher level of intent than a casual browser, showed some appetite to find a home even during the 2020 lockdowns.

However, new listings tracked below the level of demand, taking the biggest dives in May and September.

Peter White, managing director of the Finance Brokers Association of Australia, says the group’s 9200 mortgage brokers have never been busier due to demand.

“It’s not like the sector has slowed down at all. But I do hope the market settles down into a new normal rather than being overheated,” he says.

“As the market does return to normal at some time in the future, interest rates are going to go up, and that can play havoc with people who have bought in a heated marketplace.”

Currently before the Senate are the federal government’s proposed changes to responsible lending laws, aimed at reducing verification procedures and the burden on banks to ensure borrowers can afford loans.

However, Oliver expects this to have a negligible effect if passed.

“As it turned out, we didn’t need it as the property market boomed anyway,” he says.

“If it does eventually pass, it might provide a bit of a boost, but there’s so much scrutiny of the banks now it’s hard to see it leading to a relaxation of lending standards by the banks.

“If it does pass into law and come into effect later this year, it may come at a time when APRA has moved to tighten lending standards anyway, particularly if the property market remains hot.”

Kay & Burton board director Ross Savas says buyers remain in the hunt, despite the social uncertainty.

“People are fatigued. People want to get on with their lives,” Savas says.

“Imagine putting your house on the market, but you can’t allow anyone through – to when do you push out the auction or expressions of interest date? Last year, when we were able to convince the state government to bring back one-on-one inspections, it really did work.”