Spring property: Are buyers in the box seat and how will capital city prices fare?

By Tom Watson ·
australian-suburban-house
  • Spring property season is usually the busiest time of the year
  • COVID pandemic has hurt auction markets and property values
  • Opportunities to buy at lower prices in some locations
  • Sydney market expected to favour buyers
  • Melbourne market may take longer to heat up this year

Spring has officially arrived and with it so has Australia’s busiest property season. But as we all know, 2020 has been a year like no other.

COVID-19 has already caused notable downturns in both property values and rental returns in some markets and forced over 800,000 Australian mortgage holders to seek repayment deferrals from their lenders. So, how is the spring market set to shape up this year? 

According to Mozo Property Expert, Steve Jovcevski, buyers are likely to have the upper hand in the market, though sellers won’t necessarily be too bad off. 

“Overall I think that if you’re a buyer you’re going to be in the box seat this spring given that there’s likely to be a lot more auctions coming up - especially buyers who have got their finance approved,” says Jovcevski.

“During winter there obviously weren't a lot of options and people weren’t enthusiastic about selling as a result of COVID-19, unless they had to of course. But I think there will be more supply on the market in the coming months, and when there’s more supply prices do tend to flatten out.”

Major city predictions

melbourne-city-scape-and-rooftops

Before we jump into spring predictions, it’s worth recapping the price trends we’ve seen over the past year. Of course, while attention tends to be focused on the major Sydney and Melbourne markets, there’s been some equally interesting trends in other major capital cities.

As the latest figures from the August CoreLogic home value index below show, the pandemic really has flipped the direction of property values in most cities.

Quarterly changeAnnual change
Sydney-2.1%9.8%
Melbourne-3.5%5.9%
Brisbane-0.9%3.5%
Perth-1.6%-2.0%
Adelaide-0.1%2.7%
Canberra1.3%6.9%
Hobart0.3%5.5%
Darwin1.0%0.0%

But will spring fare differently? Turning towards the months ahead, here’s a snapshot of each major market including Jovcevski’s thoughts and his price predictions for spring.

Sydney (1-2% increase)

Prices in Sydney have probably fallen back to where they were in November 2019, but the fact that we’re still at those levels is pretty incredible, according to Jovcevski.

“I think that prices are still likely to fall a little bit further in some areas, but in other areas prices seem to be strengthening again, ” says Jovcevski.

“As an owner-occupier there are obviously great incentives at the moment with historically low interest rates, so if you can get your finance in place you may be able to get yourself a good value property towards the bottom of the market.”

Still, Jovcevski says there could be a good opportunity for savvy investors.

“That doesn’t mean that it’s not a good time for investors looking to buy, as they could potentially find themselves a good deal - particularly with apartments,” he says. “Investors will just need to balance the price they pay against the likelihood of a lower rental yield in the short term.”

Melbourne (2-3% decrease)

The major factor likely to impact the Melbourne property market this spring is the Victorian lockdown and the ban on in-person auctions and inspections. As a result, Jovcevski expects a slow start to the season and further price drops.

“Melbourne’s obviously been hit the hardest by COVID-19 and it’s still in this period where there’s not a lot of buying or selling going on,” he says. “The transactions that are happening are likely from owners who really have to sell.

“Despite everything that’s happened prices seem to be holding up fairly well, though not as well as Sydney. I still see there being some decreases in Melbourne to come though, probably in the vicinity of 2-3%.

“Hopefully proper auctions will be able to start again soon, but until then Melbourne’s spring will be quiet. I expect things to really pick up in November or early December though where it will be very strong.”

Brisbane (3-4% decrease)

While prices haven’t dropped by a huge amount in Brisbane, Jovecevski believes they are likely to dip in spring as more stock comes onto the market. Like Sydney and Melbourne, this will mean that the Brisbane market will favour buyers.

“Things haven’t been too bad in Brisbane and prices haven’t dropped a lot at all. As we enter September a lot more supply is going to start coming onto the market though which will likely see prices come down by 3-4% in the next few months,” he says.

Perth (1% decrease)

After a sustained downturn over the past few years, the market in Perth appeared to have turned a corner at the start of the year, but the COVID-19 outbreak seems to have pushed prices back down more recently.

“I actually think Perth will come out of this quite well overall,” says Jovcevski. “They’re already way towards the bottom of the market, so I don’t think prices are getting much cheaper.”

“They would have likely continued to turn around already if not for COVID, so while prices are likely to plateau a bit during spring, I expect that they’ll start to increase afterwards.”

Adelaide (1-2% increase)

Often given the title of Australia’s steadiest market, Adelaide is set to live up to its reputation again this year, according to Jovcevski.

“Adelaide’s a very stable market and it always has been, so I expect that it will continue to do okay. It has dropped by a few percent of late, but nothing significant, so I expect it to pick back up again as the overall economy improves,” he says.

“Like Perth and Canberra, Adelaide may be a location investors from interstate start paying close attention to if they’re turned off the market’s in Melbourne and Sydney.”

Canberra (3-4% increase)

Unlike many of the major capital cities, the nation’s capital has proven to be remarkably resilient to the effects of COVID-19. In fact, Jovcevski expects Canberra to be the strongest market this spring.

“Canberra’s fared relatively well in recent months,” he says. “Obviously it’s a totally different market given its high number of public servants, plus it’s not as reliant on tourists as some of the other capitals.

“Prices have continued to increase and vacancy rates have remained low, and I think that will continue in the spring season with price increases of 3-4% to come.”

Hobart (0-1% decrease)

Similar to Canberra, the property market in Hobart has largely been spared the effects of the pandemic, though Jovcevski thinks that values in the city may be nearing the top of the market.

“Prices in Hobart have still actually increased during the COVID period and the rental market is still doing outstandingly well for investors given the incredibly low vacancy rates,” he says.

“I think we’ll begin to see the end of that very soon though - at least on the property value side of things. Prices will probably either start to plateau or come down in the next few months.”

Darwin (5-8% decrease)

The last few years have been tough for the market in Darwin, with a significant downturn in prices. Unfortunately for owners, Jovcevski sees this trend continuing into the future. 

“The market in Darwin’s been in the doldrums for a couple of years now and they’ve had some big price drops.The fundamentals of the market weren’t good even before COVID, so I expect these falls to continue with a drop of around 5-8% likely from now until the end of the year.”

Financing a spring property purchase

austraqlian-currency-in-hands

Whether you’re searching for your first house, upgrading from your existing home or looking to buy an investment property this spring, the good news for borrowers is that home loan interest rates are at some of their lowest levels on record.

According to Mozo home loan statistics, the average variable rate for an owner occupier is at just 3.36%, while the average 2-year fixed loan rate is even lower at 2.51%.

Of course, some of the sharpest rates go much lower. The lowest rates currently being tracked in the Mozo database for owner occupiers and investors are:

  • Variable: 2.17% (2.20% comparison rate*) with the Well Balanced loan from Well Home Loans
  • Fixed: 1.90% (2.39% comparison rate*) 1-year fixed rate with the Rate Crusher (1 Year Fixed) loan from Reduce Home Loans
  • Investor Variable: 2.59% (2.61% comparison rate*) with the Discounted Home Loan Special Offer from Credit Union SA
  • Investor Fixed: 2.24% (3.49% comparison rate*) 3-year fixed rate with the Bank First Home Loan (Fixed, Premier Package) from Bank First

Borrowers aren’t the only ones who may be able to secure a competitive home loan deal this spring though. 

While rates have generally dropped across the board, lenders are reserving some of their lowest rates and cashback offers for refinancers - particularly those with lower loan-to-value ratios.

RELATED: NAB offers $2,000 cashback for mortgage refinancers

Preparing yourself for a spring property purchase? Start comparing your loan options with the help of our handy home loan comparison hub where we compare over 500 loans from more than 80 different lenders.

Compare home loans - page last updated September 19, 2020

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Tom Watson
Tom Watson
Finance journalist

Tom Watson is a financial journalist at Mozo, specialising in fintech, property and business banking. Whether it’s reporting on banking trends or uncovering the latest product innovations, Tom’s mission is to keep our readers up to date with breaking Australian financial news. His work is often sourced in the media and across social media channels. Tom has a degree in Journalism from the University of Technology, Sydney.