This report is being written during Dan Andrew’s “circuit breaker” lockdown and it has given us time to reflect on what has been the most incredibly busy summer on the Surfcoast.

In our last Great Ocean Report, we spoke about both the psychological factors (response to being locked down, people escalating their plans forward, etc) that were driving the property market and the environmental factors (zoom, cheap money, etc) that allowed it to occur.

We have never seen more active buyers in the market than what we are seeing at present, as people genuinely look to change their lives post COVID. More lockdowns only increase this resolve. These buyers fall into three broad categories: those that want to move permanently, those that want somewhere to escape to on a semi-permanent basis (working via zoom several days a week) and those who have always thought about a beach house but have accelerated those plans, especially now that they cannot travel overseas.

One of the most common questions that we get asked is How long will this go on for? Followed by Where is all the money coming from? Is this sustainable? Let’s see if we can work this out.

Essentially when we get asked about how long can this go on for? What people mean is, will the number of buyers in the market drop off or lose their sense of urgency? If we look back to recent history, what typically happens with peaking markets is that they build steadily and there is a trigger event that pulls them up. For example, in 2003 it was interest rates and changes to auction laws, in 2008 it was the GFC, in 2015 it was APRA (who regulates the banks) placing restrictions on banks’ lending to investors.

This time around it is a little different in that this high level of activity was triggered by an event (a response to COVID) but there are factors that could slow it down over time. These include:
1. The vaccine allowing people to revert to their regular pre-COVID lives and losing their sense of urgency in buying out of the cities.
2. Normality brings distractions. School sport, returning to the office and not being a top-of-mind priority can distract many potential buyers who previously had the time to focus on a coastal purchase.
3. Buyer fatigue. Buyers often start with a lot of enthusiasm and if they are not successful in their hunt, miss a few properties or get priced out of their comfort zones, often just give up.
4. Although it seems very unlikely at present; an interest rate rise usually pulls a few buyers out of the market. It is not the rate rise but the trend they worry about.

What is hard to judge is how the death of the “bums on seats” mentality by employers as a result of COVID will shape the future of the workplace. The ability to work remotely and interact via video, with your employer’s blessing is a new factor without precedent. We know that this has been a significant justifier for a coastal or regional purchase for many as they redesign their lives under this new regime.

Where is all the money coming from? Outside of the general reply of “it’s coming out of Melbourne”, the real answer is that it depends on the price point. Some buyers are simply asset swapping, that means selling one property to buy another. There may be some short or medium term borrowing to cover the transaction or the shortfall, but the bulk of the money is coming from another asset. At the lower end, people’s tolerance for large mortgages has grown, it’s not seen as anything unusual anymore and at the upper end, it is simply the domain of the already wealthy, many of whom have done very well or have not been affected in COVID times.

In terms of if it is sustainable? Property markets only go bad when properties come onto the market and there are no buyers. A point and example to highlight is that the discretionary lifestyle towns of Anglesea (3313 properties), Aireys Inlet (2045 including Fairhaven, Moggs Creek and Eastern View) and Lorne (2392) are very small in size, so stock levels of available properties for sale are always tight, and to have a great year real estate wise, we need less than 200 buyers a year to cover all three towns.  That’s 200 families or couples out of a population of 5 million+ who decide they would like a property on the coast. Find best online pokies with onlinecasinos-australia.com. Play Pirates Map pokie for free here. Recently we had a campaign that saw over 100 parties through one property over a 4 week campaign. Torquay and Jan Juc attract more owner-occupiers these days, which is an even broader demographic and often with more budget, because they are searching for their primary home.

Typically, what has happened in the past is that prices have accelerated in busy times and generally held or slightly settled in quieter times and this is simply because of the lack of supply. Also, if you look at examples of areas with similar distance to Sydney, places like Noosa or Byron Bay or even on the Mornington Peninsula and the values of these areas, you could argue that the Great Ocean Road values have lagged by comparison and are now catching up. This has been supported by buyers who have previously been able to travel overseas now looking locally, which like the Zoom workers, is a new element in this cycle.

The simple message is that yes, it is a seller’s market; however, buyers can take confidence from the fact that there are strong supply and demand fundamentals that are underwriting the market and the supply side of the equation cannot change due to the inability for the towns to expand.

If we can be of assistance in any real estate matter, please do not hesitate to call.