The Melbourne market has by-and-large met the 2022 Pace outlook.
While uncertainty lingers, there are plenty of economic indicators to support healthy property prices and a high demand for desirable projects. From immigration to relatively low interest rates (on a global scale), robust employment and an undersupply of housing, even the economists have acknowledged that property prices will not fall by as much as they had predicted last year.
Open borders bolster optimism.
An influx of immigration has inspired the return of healthy competition under the hammer. Numbers at opens are busy, with auction clearance rates consistently over 65%. However, when it comes to off-the-plan developments, prices are increasing in line with construction costs and supply-chain shortages.
Affordable housing is in high demand.
After some decades of relatively low rates and mortgages, the Australian market is now facing a rise in both. Affordability will continue to be a concern for owner occupiers and tenants alike until property shortages and supply constraints ease. This has become a greater social and political issue which will require government and industry collaboration to address the undercurrent issues.
Despite these interest-rate increases, first-home buyer enquiries have picked up considerably in April. Prospective purchasers have noticed that prices are not falling as predicted (while rents have jumped significantly), driving a healthy demand for affordable homes.
A level pricing field.
Construction prices haven’t softened as the industry had hoped, further delaying project launches. We expect to see more developments released in the latter half of 2023, which will reflect today’s cost of construction, therefore supporting feasibilities and funding requirements.
Who’s priced-out and who’s buying?
Generally, investors remain subdued awaiting further certainty on rate increases. However, down-sizers, our strongest cohort of buyers within the off-the-plan market, continue to enquire and transact. With little to no debt on their principal place of residence (because of elevated property prices) we see no slowing in the downsizers’ market as long as developments continue to meet the requirements of location, amenity and delivery with certainty.
Pace continues to perform.
As an end-to-end developer, the current market climate has been an incredible test on Pace’s ability to predict, pivot and prioritise its amazing team and trusted partners. Despite cost-escalation and sub-contractors going under, Pace’s building arm has delivered the final towers at Pace of Blackburn, final stages of townhouses at Sunshine North, while also commencing projects in Flemington, Coburg, and Cremorne.
