Housing activity in Melbourne's inner-city suburbs is still expected to remain muted in the next few months despite the early signs of recovery, according to the latest report from Herron Todd White.
Perron King, director at HTW, said demand for homes in the central business district is likely to remain sluggish. The travel restrictions and closure of international borders would limit the arrival of overseas students, tourists and new migrants either from overseas or interstate.
"With lower or no rental income and the inability to secure new tenants, investors are likely to sell their properties, which will add more stock to the market which already has high supply," he said.
There were approximately 4,300 transactions that took place across the city in November last year. At the same time, 8,054 new listings were added to the market. This translates to a sales-to-new listings ratio of 0.5. These happened even with the 0.7% rise in dwelling values during that time.
King said the likelihood of lower sales and increased supply could potentially hamper growth in dwelling prices. While this could result in investors becoming more cautious, this could also present an opportunity for owner-occupiers to check bargains.
"We expect that the rental market in the CBD apartment will start to recover gradually.
The median dwelling price in Melbourne increased by 2.1% to $717,767 in February, according to CoreLogic – making the city the second strongest-performing market in the month next to Sydney. However, on an annual basis, the city's median dwelling price is still 1.3% lower.
Still, King said recent factors could still indicate a positive outlook for Melbourne. For instance, the announcement of stamp duty discounts in the 2020-2021 budget would improve optimism.
"New and off-the plan properties will receive a 50% waiver on stamp duty, with established property receiving 25% up to 1 July 2021, with discounts available to both investors and owner-occupiers on property valued up to $1m," he said.
