Property Hub - Investment Insights & Inspiration - Realty Talk: Melbourne under the microscope

Episode Date: February 25, 2023

This week we will look at the Melbourne and regional Victorian property markets. We are fortunate to have property expert, Cate Bakos to help us do that.    Cate is a licensed agent, a buyer's advocate and a property commentator, regularly featured in national media.   Cate has a wealth of knowledge and experience when it comes to the Melbourne and regional Victorian property markets, and is well-known for her ability to provide insightful and practical advice to buyers and investors alike. Cate will share her insights including recent trends, emerging opportunities, and potential challenges. RealtyTalk is part of the Property Hub podcast channel, your home for property investment insights, inspiration, and stories from Australia’s top property experts, investors, leaders, and analysts. Subscribe now to get every RealtyTalk episode delivered to you each week for free, and also get full access to Get Invested, the leading podcast for Australians who want to unlock their full ‘self, health, and wealth’ potential and get inspired by the stories of investors, founders, and entrepreneurs. Subscribe to RealtyTalk on the Property Hub channel: Apple Podcasts | Spotify | Google Podcasts | Email Property Hub is a collaboration between Bushy Martin from KnowHow Property, Kevin Turner from Realty, Andrew Montesi from Apiro Marketing and Apiro Media, and Australia’s largest independent podcast network DM Media. Business and partnership enquiries: [e-mail] omnystudio.com/listener for privacy information.

Welcome to Realty Talk, the show that brings together the country's most authoritative and respected property experts. Follow us on all the socials and subscribe for updates and exclusive offers. Realty Talk is powered by realty.com.au, connecting buyers, sellers and agents differently. Hello and welcome to this week's show. Well, today we're going to have a look at the Melbourne and regional Victorian property markets. We are very fortunate to have a special experienced and highly regarded property expert, Kate Bakos,

who's going to help us do just that. Now, Kate is a licensed agent. She's a buyer's advocate and a property commentator and is regularly featured on national media, including right here at Realty Talk. She's also a regular guest speaker at property events and has won multiple awards for her outstanding achievements in the industry. Kate has a wealth of knowledge and experience when it comes to the Melbourne and regional

Victorian property markets. That's where she spends most of her time. And she's also well known for her ability to provide insightful and practical advice to buyers and investors alike. Today, Kate is going to be sharing with us her insights and analysis of the current state of the southern markets, including recent trends, emerging opportunities and potential challenges. I can't wait to hear what Kate has to say. So stay with us. Kate Bakos will join me in just a moment.

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Kate, how are you doing? It's lovely to see you again. It's been a little while. It's been so long since we connected. We did that great series over Christmas. Yeah, that was fun. Which was, yeah, a lot of fun. So thank you for that.

Some wonderful, wonderful insights. And that's what I want to do is talk to you about Melbourne and Victoria. We'll be doing this. We'll have a look at Sydney next week and then Brisbane the week after. But right now I just want to focus with you on Melbourne and Victoria, which is really where you're very heavily focused. Yeah, so, Kate, how would you describe that current market right now? Let's say Melbourne, firstly, and we'll have a look

at the regional markets next segment. Of course. Look, Melbourne is a little bit different to last year. We're hearing a lot in the media. What we're feeling on the ground, though, Kevin, is very, very different. We have a stock shortage. And, in fact, if we look at the national figures,

The figure is in my mind because it was etched in there. I was so surprised by it. But we're over 24% down on new listings when we look at the five-year average. So I guess we've been spoilt for the last few years. Even though we've been riding the storm with lockdowns, we had more stock. So what's happening now is there are not necessarily lots

of buyers out there, but we've got much smaller numbers of properties available. So our supply and demand ratio has changed a little bit. Any buyer who's trying to buy now will be reporting the conditions that I'm experiencing and that is most good properties are facing hefty competition and it's a segmented market as well which I'll talk to you about yeah just on that point if I could ask you about stock is it a reluctance on behalf of sellers to list at this time I mean have they got a lack of confidence in the the market doesn't seem to have fallen very much Kate

No. Look, for all of the scare and the fear out there, it hasn't fallen that much. And we've got to remember that the figures that are reported are median figures. So you've always got types of properties that are in high demand. We've got segments that have performed, that have had positive growth, only small segments, but they're there. What is happening is vendors are not confident with the market that they're facing and probably because of the headlines. And also, Kevin, we can't forget that particularly for Melbourne, which was the lockdown capital globally, which sounds awful, people made decisions. We saw a lot of decisions. So for all of those vendors that were thinking about doing something, they made decisions then.

And so when you've had all of that sales activity kind of pushed forward, you do also sometimes find that you don't get as much activity after the event. So they're the two main causes I think. We're watching auction numbers too each week and you know we're noticing I think it was last week in was it Sydney? Sydney had a tremendous turnaround last week. How's the Melbourne market looking in terms of both buyer and seller confidence in auctions? We've got mixed buyer and seller confidence depending on the type of dwelling and where it's located. So for all of the higher income earners where borrowing capacity isn't necessarily a key concern or where you haven't got a lot of first home buyers who are the most jittery and understandably they haven't

been through interest rate rises before. We've got those markets with experienced or sophisticated or high income buyers. Properties, good properties are selling well. In fact, I had two auctions in a row. I thought I had very strong budgets for each because I had very emotional owner-occupier buyers, but we missed out on both of them. We had multiple bidders and that's a hallmark of a quality property in an area like that where you're not exposed to those jittery buyers but if we look at townhouses and typical first-time buyer stock and certainly fringe suburban stock it's not the same thing and agents are savvy about this they're not necessarily taking a property to auction when they've got a marketplace that is jittery and instead the

clever tactic that they're applying is running expressions of interest campaigns which still have an end date and probably a campaign length somewhat like an auction campaign, maybe three or four weeks. They're giving the campaign enough time to get buyers through, but they're giving the buyers an opportunity to put forward an offer that's subject to finance or subject to whatever they're nervous about. So for the vendor, it means that they're getting multiple offers. They might get an unconditional offer, but they've got competition there to drive up the price for them. It's our private treaty method, isn't it? I mean, in a market like Melbourne, where you're so used to auctions, how are buyers reacting to that? It can be quite scary, especially when you're

going into competition. At least with an auction, you can see your competition, but when you're blind bidding like that, you can't. You're absolutely right. It is difficult for buyers. They've got to decide what they want, really, because sometimes a buyer will trigger one of those blind auction scenarios, and then they find themselves guessing what their competitor might put forward. But I think for a lot, it's a welcome reprove if they are contingent on having a finance clause. It means that they can actually move forward with confidence. And if they feel that they've paid too much and the bank agrees, maybe the sale won't go through. But it is one of those scenarios. And the agents know well when to apply it and when not to.

In the inner ring locations with nicely presented and renovated properties, whether they're family homes or single fronted terraces the agents know when to run an auction campaign and when they get it right they have a wild auction those that trust factor between the agent and particularly the buyer in a scenario where you've got multi offers um it's sometimes quite um quite treacherous because you know buyers well they just don't trust the agent the agent says well you're in competition oh yeah sure here we go here's the spin um yeah so it really is a balancing act what are you hearing from agents about it oh look there are some agents that that you shouldn't trust but ultimately if you've had good dealings with your agent you have to understand that if they're telling you they've

got multiple offers and you you low ball it they won't come back to you if it's if it's one best and highest kind of offer the agents are telling us about buyers that are low balling or perhaps standing back and thinking that they're bluffing. And there's nothing worse for an agent than someone assuming that they're bluffing and they know that they're going to deliver an unwelcome phone call the next day. But at the end of the day, if the buyer likes the property, the best thing that they could do is some thorough analysis, work out what it's worth, put forward an offer that is representative of how they feel about the property in terms of how suitable is it and how frequently does one like that come up? Because if they're only coming

up twice a year you've got to factor that into your offer with a bit of advice here for buyers i guess um when they find themselves in a multiple offer situation i know in different parts of australia there's a requirement by the age not a requirement so much but you know good practice dictates that they will give a document to say you're in competition and therefore your offer you know needs to be your best and final offer does that happen in the melbourne market just a bit of education for buyers how does that work yeah look the thing about a private offer is you are it's all up to the agent you're bound by their rules unlike an auction where you've got auction rules and they're consistent they're legislated private sales aren't the same the only thing the

agent's bound to do is obviously all of the the paperwork related things and you know they've got to present you with the contract they've got to disclose material facts they have to present all written offers to the vendor but there's lots of shades of grey and I hate using that phrase but it's true if an agent decides it's best and highest or you can have a second crack if you're the first person that puts forward an offer they often do that or if they're deciding to have a zoom simulated style auction it's totally up to the agent so the best thing the buyer can do is understand the agent's rules of the game before they put forward their offer because if it's best and heist and one shot only there's no point dithering around with a low ball offer hoping

they'll come back and negotiate but likewise if they tell you they'll come back to you it's all right to say to them when can i anticipate hearing from you and i'm confirming that if there's an offer that's higher than mine you will come back to me and i will have another opportunity you've got to ask all of these questions so you're absolutely crystal clear on how they're going to handle it's very very very good advice particularly that last point about you know getting an assurance from the agent that if there is an offer better than mine that you'll come back and give me an opportunity which you know went from an agent's point of view the agent will instantly say okay there's more money in this buyer so you you've got to balance that up too

it is a tough balance yeah that's right yeah as an advocate you know it's easy for us to say look i believe this is my strongest offer but i don't want to have any bad blood with you or my client i'd really like to hear from you if if you feel that you've got an offer that's stronger than this i want the opportunity to have the conversation with them that that's a really nice little kind of decoy but um it's it is a tough one because you don't want the agent to think that you've got more but you certainly don't want to put forward an offer that's not your strongest and then be remorseful about missing it keen to talk to you now about um the difference between units and houses what's the so the recent changes in interest rates and lending criteria how have

the banks reacted to to that well the banks have applied the increases which we'd all expect but what they haven't seemed to be doing as far as i've noticed is we haven't had valuation shortfalls or certainly i haven't and that's one of those those dreaded things that you sometimes face in a market that deteriorates especially when lender scrutiny is really strong you pay a certain price tag and evaluation comes in lower, that's not a happy Christmas present at all. I haven't been seeing that. But in terms of lender appetite, the lenders are hungry. They're all experiencing lower customer numbers. The profits are high, but they aren't doing as well. They're certainly not having as many deals as they have in other years. And first-time buyers, investors,

everyone's come off a little bit. The majority of the activity that lenders seem to be doing at the moment is refinancing, which you can imagine, but that's a bit of musical chairs where people are shuffling from lender to lender. But in terms of appetite for houses and units, it's been pretty consistent. Lenders will always scrutinise a property that doesn't meet their criteria, so if it's the wrong zone or the floor plan's

too small, but otherwise, Kevin, I haven't seen lender scrutiny on dwelling types between houses and units. Fair enough. I want to ask you in a moment about your tips for anyone looking in the Melbourne market right now. But before I do, just an insight from you, if I could, what do you see for the Melbourne market in the next five to 10 years? Oh, that's a good question.

Yeah, pull your crystal ball out, come on. I'm a Melburnian, so let me say that there's always a little bit of natural optimism and, dare I say it, bias, but not through, you know, any willingness to try and mislead people. I just believe in my market, and I've been an investor in this market for over 20 years myself. Melbourne is one of those cities that tends

to have a more consistent line. When you stand back and look at the chart, if we compare it to other capital cities, the lull periods that other capitals have had, we haven't really seen in Melbourne. We've had our share of downturns, but they tend not to last for very long and go too deep. So I've got absolute optimism for the Melbourne market.

we've been really knocked about with the lockdowns and what we all went through but we've got a lot of new arrivals scheduled to continue coming and we've also got some exciting very nearby regions so the way that we're spreading around people and jobs is really interesting and we've had an enormous spend with our infrastructure so I think rail amenity including linking the airport will certainly do wonders for our city. I think our cool climate will continue to draw a crowd, especially as temperatures seem to get higher. But I think overall, our employment offering and the fact that we're certainly letting in a lot of new arrivals for quite a while, I think that will hold us in good stead, Kevin. I'm not going to ask you to tell me the areas

someone should look because really that's somewhat of a silly question because, you know, people are going to look where they want to live basically. But I will in a moment ask you about areas that probably buyers should be a little bit wary of, not necessarily not buy there but really do good due diligence. But before I do that, can I just ask you what advice you'd give someone if they were looking right now to buy in the Melbourne market?

It's a difficult one for buyers. I'm asked this question every single day. Is now a good time to buy or should I wait? That's the theme of 2023 so far. We probably have interest rate increases in front of us. I don't think we've quite reached the equilibrium cash rate yet. How many more increases? We don't know.

Bond yields suggest that it will be under four. I've read articles saying that bank economists in Australia are tipping slightly over four. none of us really know though and as we get closer to that point of equilibrium there are buyers that are going to continue having their borrowing capacity constrained and so they will potentially be disappointed that they miss out on being able to buy what they want in the market they're having their budget downgraded by third party but then there are buyers that don't necessarily have any budget constraint with the rising interest rates so they're the buyers that are sitting on the

sidelines saying, when that bell rings, when equilibrium strikes, when interest rates stop moving, I'm going to then jump into the market. Now, there are a lot of those people. If they all jump into the swimming pool together, well, we know what will happen to the water level. And I think that people need to be mindful of that. If we do get a rush of people, you don't want to rush with the herd. You'd rather be in front of them. So we've got two forces at play, competition potentially jumping in and also borrowing capacity being constrained. I would think about what I was comfortable to spend, knowing that the bank are applying buffers

to their assessment rates anyway, which currently is a 3% buffer rate. If you feel that you can jump into the market now and get the product that you want, you might look back in a year's time and say that was a great move. So buffer, buffer, just build that buffer in. Work out what your repayment schedule looks like

and be comfortable with that, knowing that there could be another, however many basis points applied to your loan. But if you're waiting for the bell to ring and for everyone else to jump in, it might push prices up. So you're really working against that happening, but also if you've got a borrowing capacity constraint, you've got the clock ticking.

The next time there's a rate increase in the bank supply, an increase to the interest rate, you'll have a lower price point. Okay, so let me ask you now about the areas probably that should be avoided. I'm also going to ask you why those areas. Is it stock-related? Is it socioeconomic? I mean, you know, what's happening in those areas?

Oh, a very blanket conversation. So I'm probably spanning many, many postcodes here. Anything the bank doesn't like, I don't like. So when a bank applies a postcode restriction, it's for good reason. Oh, yes. Sometimes it's overexposure in a particular area. it might be a postcode restriction for units in a particular postcode we saw that during um in recent years not necessarily right now but when we had too many apartments coming on stream

also they'll apply postcode restrictions to areas that have a flood or fire ravaged and and that can be a really tough thing for a consumer who doesn't understand that when they purchase property the bank says no because of the postcode or they require a much lower LVR so a higher deposit they're the things to be mindful of I also think in in our environment where we've got rising sea levels and and the risk of flooding you've really got to do your homework with with flood maps and with as we say in Victoria special building overlays they're not necessarily an indication of flooding but it's an inability of an area to to deal with high rain deluge yeah sorry kate are crime statistics something you take into account absolutely but if you're

looking at gentrifying suburbs you also have to take that on board and be prepared for it because a gentrifying suburb is something that transitions from an ugly duckling to a beautiful swan and it doesn't happen overnight if you wait for it to be a beautiful swan then it's not a lucrative opportunity that's right yeah so crime is very important though and the rate of social change if something doesn't have the growth drivers to change to gentrify and some areas don't and won't either forever or for a long time and you've got to factor that in yeah i guess looking at the quality of some of the infrastructure that goes into areas that could be ugly ducklings right now um you know that that's going to help help with that gentrification process even old wool

stores and old buildings that are being renovated and brought back to life if you can get it on the ground floor of some of those areas, they're well worth having a look at. Oh, they absolutely can. But people have to be very selective about zoning as well. I remember when our inner northern and western suburbs here were gentrifying and people loved the converted warehouses. If it's in an industrial zone, you might need a 40% deposit and have commercial loan rates over a 15-year loan term. So think carefully. Biggest challenges ahead for the Melbourne property market? Wow. Look, I think we've weathered a lot of challenges, Kevin. It's been pretty awful. So I feel like once our interest rate stabilises, we've probably got

some nicer days to look forward to. And I think the challenges right now across the board, but for Melbourne included, are for renters. That's a really tough thing for people to deal with if they're trying to find shelter. We've got a crazy number of people checking out properties over the weekend and you can sometimes see anything from, you know, 15 to 30 applications fielded on one 15-minute open for inspection. It's brutal. Yeah.

Kate's going to stay with us because after this very short break and a very important message, we're going to come back and we'll have a look at the regional tour market and paint the contrast between the cap city, Melbourne, and the regional areas. And I certainly trust you're enjoying the show. Our guest is Kate Bakos, who is a buyers agent out of Melbourne. If you are enjoying the show, please hit that like button as well as the subscribe button, whether you're listening or whether you're watching the show.

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So please subscribe now. When you sign up and you get the show, make sure if you do it through realty.com.au on the homepage there, we'll also send you a free copy of Bushy's award-winning book, Get Invested, just for making the effort. Thanks for being with us. Stay with us. there's more to come. Kate Bakos back in just a moment. Successful property investment is a game

of finance. Do you have the right team and the right game plan? Realty Talk is brought to you by KnowHow Property. More than mortgage brokers, Bushy Martin and his team of investment architects set you up with a sustainable strategy structured to lower your costs, tax, risk and stress while increasing your capacity for growth. KnowHow has helped over 1,900 homeowners and investors secure more than $800 million in property wealth. So get set to live more, work less, and live your legacy. Want to know how to invest in your freedom? Visit knowhowproperty.com.au. Welcome back to the show. Our guest this week is Kate Bacos, who is a buyers agent in Melbourne. and we've just had a look at the Melbourne market.

We're going to look at the regional market. But, Kate, just before we go, can I just ask you, just jumping back into Victoria again, are there any surprises you've seen, anything that's sort of come out of the blue that has surprised you a little bit about the Melbourne market in the last year or so? Yes, indeed, Kevin. It's a good question.

You asked me to ask it, so I'm asking. I planted the question and you asked me. So we've had a sea of negative data, and some of them, you know, very moderate price falls um not colossal but when we look at the data and it's broken up into sa3s which is how our suburbs are collated into clusters the one that was a really pleasant surprise and not a shock to me because i'm on the ground and feeling this was actually the performance of melbourne cbd and docklands and south bank they recorded plus 6.5 percent for the 12-year rolling average which is no mean feat when you consider everything that's very high

it is and it's it's quite a dramatic differential to every other SA3 in Melbourne and the reason why that's performed so well is we've had a strong uptake in apartments in these locations that shouldn't come as a surprise bosses have called people back to work whether it's hybrid or full time or one day a week whatever and everyone that did the the tree change and the sea change it's a long commute and so for some they've got their their piece of paradise back in the city it might just be a small one better or or they might have decided to transition back but those areas have bounced back so they really suffered during lockdown and we've seen a completely elastic reaction there. Wow good I'm glad you got me to ask that question okay let's go into

regional Victoria now compared to say Melbourne the Melbourne market how do you subscribe how do you describe, sorry, those regional Victorian markets? Well, they're a lot of fun to shop in, especially when you're getting a little bit further away from Melbourne. If we take Geelong as an example, that's the closest regional market. It's our second biggest city in Victoria. The Geelong agents run auction campaigns very similarly. And a lot of that is because they've had crossover in their places of work. Some of these agents have moved to Melbourne, started their career, gone back to Geelong to get married and have kids. Or there's been integrated training. We've got a lot of agencies that are same in whether they're spreading their

offices across Melbourne and Geelong. We see that Geelong is very much in step with Melbourne. And in terms of price movements and buyer trends and seller trends, they're usually mirroring us or maybe a month or two behind us. And so you can get some leading indicators out of Melbourne market and apply it to Geelong. But then you've got some really beautiful coastal areas and they're quite different still. Our regions came off after our capital city came off. So they held firm for a little while there. But when we look at stock shortage... Why was that? Have you got a view on why that happened? We still had people getting excited about moving to the regions. I think that the battle scars from lockdowns lasted for a little while. We didn't just come out of lockdown

and say, yeah, we love the city. We're all a bit wounded for a while. And the fear of further lockdowns and and you know decisions on how our government dealt with pandemic i think that the fears were alive and well and also people were embracing tree change and sea change because they've got friends that have done it you know you can you can catch that bug or catch that wave and we we absolutely saw that good schools good hospitals um our major centers all have that so I think the mystery out of how do you make it work was completely shown to people. There's no mystery. You can make it work. But also, working from home, that's the big one. Bosses are letting us work from home, even in a hybrid arrangement. So moving away from the city is very

viable. And we've got really good transport links to Geelong in particular. Even though the trains are crowded, you can get to work pretty quickly. Just a bit broader than Geelong, that move that you touched on earlier about people leaving the city and going living in regions is that still happening is that is that or is it slowed down a little bit it's slowed down completely I had a lot of inquiry right through COVID yeah I'm not getting requests for Warrnambool or Bright or Echuca or even the popular areas we we had people targeting um Castlemaine and Macedon Ranges and Bendigo, Ballarat. It's eased up. And I chat to the Ballarat agents. I'm active in that market as an advocate. And they're all saying that stock is so tight, prices have reasonably held up, but

they haven't got the glut of buyers that they were experiencing. And it got really heated and crazy in those markets after lockdown. But when people were still running away to these locations, the agents were reporting that they had multiple offers on the day that the property was launched and some of them couldn't even make it to the internet the agents would tell a select number of buyers that had missed out on stuff come to this listing i'll get you through when the photographer's there and they were fielding offers as people were walking out the door so the photos weren't even on the net it was tough yeah in markets like that too you see an influx of agents into the market because well let's face it you know properties almost sell themselves and

it's it's pretty easy are we seeing uh an oversupply of agents in some of these regional areas now or are they diminishing as well i would argue that we have had more agents jump on board when the the gravy train was running and i'm certainly seeing agents dropping off when we know that because we send out emails um to our our agencies each week with our client briefs And the number of return emails that we're getting are quite significant. Yeah, I do know as an agent, the best time to get into the market is when it's tough. That's when you'll learn some real good skills. But if you get in a market that's moving fast, you really don't understand what it's like.

And then when it hits, and I'm seeing it now in our marketplace here, agents who have only just joined in the last couple of years, they had a field day and now they don't know what to do a stock that's on the market longer than 90 days so it's a different skill set we're off topic sorry let's get back to it um which are the the regional uh victorian markets that are standouts for you uh you've already mentioned geelong are there any others we've we had some really standout results in our coastal markets namely the morning to peninsula the surf coast wasn't far behind it and they are still stand out but you asked me in the last segment that we recorded if there were areas that i'd steer clear of and i talked about things like rising

sea levels and flood reports etc and maybe crime stats but i'm also very very very wary of some of these coastal areas that attracted a lot of people during covid we had additional savings after COVID because we didn't spend, we were saving, we had really low interest rates, people went nuts. And the prices were pushed up dramatically. And these areas are the ones that absolutely outperformed. So if you look at all of the suburbs across Victoria, it's these coastal markets that won the medals. And I'm concerned that there will be some elasticity there, but also I'm worried that that will be amplified by rising interest rates. And people who are holding holiday houses saying to themselves things are a bit tight I've got to let something

go you'll always be loathe to let the family home go or to pull the kids out of private school so if there's anything that you can give up it's usually these you know extra properties that yeah and that's my concern I'm not saying it will happen but I think people have to be very very careful about paying top dollar and using comparable sales from the good old days last year and the year prior when our conditions are very, very different now. For those listening who don't have a beach house and maybe would like to buy one, there are obviously going to be some opportunities coming up if what you say does actually come to fruition. I believe it will, knowing your background and your knowledge.

So what areas do you think people should be looking in if they want to hang out and maybe look at buying something in the next year or two? When it comes to finding a holiday house, you want to target where you'll be really happy you don't want to just go where there will be bargains but I think those areas that went crazy during COVID are the ones that could come off and namely the Mornington Peninsula the surf coast on Phillip Island there are opportunities there but people also run away to the Macedon Ranges as well there's some really gorgeous holiday type places there that you could target and and I think anything that's more than a 90 minute commute you might find that we've got a wave of people that when they're called back to

the office hybrid or full-time they'll decide to exit out of those properties and come back to Melbourne so I think there's opportunity I guess it depends what you're after whether you want to get to you know one of those coastal areas you want to get up into the mountains but there's always a you know a good lot of variety I don't know where I'd I think I've uh I enjoy the the coast you know because i still enjoy the car we do a lot of kayaking and fishing so you know for me that would be my preference yeah beautiful so you can target lakes as well we've we've got some really stunning holiday places around victoria yeah um kate are there any challenges specific to the to regional victoria that that you think buyers should be aware of or what are you watching

out for as a buyer's advocate? You always watch out for price elasticity. You don't want to go into an area that has been humming along at a rate of knots and then your purchaser is the one that experiences a deflating market. So that's the first thing that I'd talk about. And targeting... Can you just qualify elasticity for me for a minute? What do you mean by that? Well, the prices went up during COVID because there was just such extensive buyer demand. and now that there's not that demand we're seeing prices come off but to target an area that had really strong growth and to use a vendor's expected price as an indicator for value is not the right thing to do you've got to do your homework because vendors will always want what

the the impressive results were they'll they'll benchmark their expectation on recent sales that aren't all that recent so you've got to do your homework you don't want to pay a 2021 price in 2023 let's talk about rentals for a moment and we we didn't talk about rentals in in melbourne but let's have an overall view of that now how tough is that rental market very tough for for renters it's also i don't want to sound like i'm being um too soft on on landlords but we've had some really tough reforms that have rolled out and some of the reforms involve additional expenses that can be really hefty in terms of electrical compliance and gas compliance and all you need to do is pay your $400 for your compliance officer to come out and then they'll

tell you that you need to spend $10,000 to be compliant. That's a really expensive thing to go through and as a result what we're seeing is a lot of landlords that are sick of it and also landlords that are asset-rich, cashflow-poor who can't pay to have the property bought up to code. So we're losing a lot of rental stock. And we've also got an ageing population where baby boomers are looking at retirement and cashing out of investments for other reasons.

But the long and short of it is we've had a deteriorating number of available rentals and our rents have gone up across the board, not just in Melbourne. The region's really copped it during um covid lockdown because people were running away and wanting to try before they buy so it's it's been a dabble whammy but our our unit market kevin is um exhibiting rental increases of more than 15 for the last 12 months so that that is indeed tough on renters but we also

have to put that in perspective during covid you couldn't you can give them away for 20 a week no one wanted to live in the city so that was a bit of an exodus yeah I was actually going to ask you about COVID-19 and I haven't done it up to this point we may have already covered but I'll ask you anyway as to whether COVID-19 the pandemic affected the regional Victorian market say more so than Melbourne because you think of regions and open air and fresh air and healthy did that translate you know what i really thought it would i thought melbourne would exhibit the strongest regional price growth and it was actually segments of new south wales and the right person to ask this to from a national point of view is simon presley he's all all over it but we did have

enormous growth in our regions we had enormous growth in in our coastal areas as well which you don't associate with regional cities. You more think of those as holiday lifestyle because work from home was rampant in Melbourne. But if you look at the differentiation between the Melbourne price movement and the regional, I think we have the biggest gap. But if you look at total performance, I think parts of New South Wales and Noosa, coastal Queensland, trumped us.

Final question for you in this segment. have you noticed any interesting property trends? You gave us one for Melbourne. Have you noticed any interesting property trends in regional Victoria recently? No, it's been a surprise that I haven't noticed a trend, to be honest. I thought that it might have all come off pretty quickly when Melbourne settled down and happily it hasn't. But we've got a lot of investment, civil works and infrastructure upgrades, rail, road, and people are responding to that. I still think that work from home as a nearly accepted phenomenon that's here to stay certainly in lots of different types of employment I think that will hold up the local regions anyway the ones

that are within 90 minutes drive I think that tends to be people's tolerance and anecdotally whenever I've chatted to anyone who wants to do the move they've all had that as their their time restriction for travel okay i'm going to give you a minute or two to reflect and are we going to take a short commercial break an important message and when we come back i want to ask you i'm going to give you notice here i want to ask you just to sum up for us the you know melbourne victorian markets and you know give it to us in maybe 60 seconds or two minutes so so put your thinking cap on. Stay with us. This is Realty Talk. My guest is Kate Bakos, and we're looking at the Melbourne and Victorian markets. I'm Kevin Turner. We'll be back in just a moment.

Property depreciation is the natural wear and tear of a building and its assets. Property investors can claim depreciation as a tax deduction each financial year. Depreciation is a non-cash deduction. This means you don't need to spend any money in order to claim it. On average, BMT tax depreciation fined residential investors almost $9,000 in first full financial year deductions. Call BMT on 1300 728 726 today for an obligation-free quote. Okay, Kate, you've had your minute or whatever it's been. Give us your words of wisdom to wrap us up

on the Victorian and Melbourne markets. What's the future? Well, yeah, in a nutshell, I think that our future looks good once interest rates stabilize. What I haven't talked about with you today, Kevin, is the difference between renovated and completely unrenovated properties. Unfortunately, we've seen very little appetite for renovation projects or for developments, and we've had very significantly lower new builds. So the pressure on established property that's nicely presented and better yet, recently renovated is enormous. I think that will

continue to be a reigning trend but i also think that we'll see first home buyers return with confidence when interest rates have stabilized and they've got clear visibility on on their borrowing capacity because juggling interest rate changes on a monthly basis and not knowing when the lender is applying that to the servicing calculator has been the the tough part for for this contingent that's my my thinking interesting you're talking there about renovations and it just twigged then about the block and i has been going for how long has been going now like you know 20 years or i don't know 15 years or something but it went remember when it first came out they were they were like so incredibly popular and they'd get massive massive figures and

now nothing to see on the block where you know they just don't sell i mean i i sometimes wonder about renovations whether they've totally come off the boil yeah to to talk about um renovations in general and not really the block per se um people know that we've got that's not really renovation is it it's not real it's not real life you know it's it's reality tv but it's not real you've got other trades coming in um and you've got to look at the location as well it's it's there's no point just looking at the physical product itself you've got to look at the land and and all of its attributes and we've had some quirky block locations so I put that to one side but just talk generally about renovation trades are expensive materials are expensive

wait times are huge and getting a rental while you renovate is much tougher and much more expensive so we've got all of those things that are adding to to the cost of building and people are just saying yeah nah okay great talking to you it always is and uh you know i want to get you into the show more regularly as we look at that melbourne market and look at sydney next week and then brisbane the week after but i'll get you back as a regular guest to give us an insight into the melbourne markets okay thanks for your time always a pleasure great to see you and we hope you've enjoyed the show listen before i go um make sure that you don't miss any of the episodes of Realty Talk by subscribing to Property Hub, and you'll find that on your favorite podcast player.

If you do it now, you'll also receive a copy of Get Invested, the podcast delivered to you each and every week. That's once you do it through Property Hub, both shows will come your way. Thanks again to Realty.com.au, BMT, Tax Depreciation, Apiro Marketing, DM Media, and, of course, Southern Cross Oz Stereo for their ongoing support and helping us with distribution. Thanks also to Kate Bacos. I'm Kevin Turner. Thanks for being with us.

We'll look forward to seeing you next week. Miss something in this week's show or want to catch up on past shows? Do it anytime at realty.com.au where we connect buyers, sellers and agents differently.