The rippling effects of Victoria’s lengthened lockdown

Lauren Staley from Infolio Property Advisors offers her thoughts on what’s shaping up to be a very different spring market.

When the Victorian Government announced that its hard lockdown would be extended last week, there was an overwhelming sense for many Melbournians of having reached the end of their tether – I won’t deny it, I was one of them. 

The additional six weeks of lockdown means real estate has been stalled for three months all together. A quarter of the year. 

As a result, Melbourne property is facing a vastly different spring. If all goes to plan then in-person inspections will be able to resume on October 26, but only if we record fewer than five new cases each for the 14 days prior. 

Regardless of whether we see movement in October or November, experts are saying that the restrictions are a ‘death sentence’ for this year’s spring market; that up to $20 billion could be wiped from the Victorian economy.

I don’t think anyone would argue that those who can hold onto property and wait it out, probably will. But, I also think the ‘death sentence’ is going too far!

The timing of these restrictions have placed many in a property stalemate:

• Those who purchased before selling face the possibility of not being able to extend their settlement, which could result in the loss of deposit. People in this predicament also face paying exorbitant interest in bridging finance, causing long-term impacts on financial wellbeing. 
• And those who started the sale process six weeks ago and had to pull their home from the market. The extended lockdown means another six weeks of paying home loans, or having a vacant property they can’t afford to hold. 

In these cases the pressure to sell is building daily and when in-person inspections are allowed I think we will see a wave of distressed sales come onto the market – the longer restrictions continue, the greater the wave. 

A-grade stock will continue to shine, and I can’t see this changing. Even through lockdown we’ve seen A-grade homes selling sight unseen within or above their ranges. 

But it’s the B and C-grade stock that may take a hit in terms of price. It will depend on how much competition is out there, but certainly buyers need to be ready to inspect from the first day of the Stage Four restrictions lifting. 

I don’t believe that it’s possible to pause the market for that length of time and resume where it left off. Astute investors and those with financial stability will be looking to pick up a bargain post lockdown; and it’s highly probable that they’ll find one.