Hot suburbs where the real estate market is braving the downturn

In far east Melbourne, where the eviction rate has been near 80 percent, high quality properties that have been refurbished and have good layouts have attracted competition.

Barry Plant Heathmont and Ringwood auctioneer Marcus Lim said tight inventories and buyer demand meant some houses bucked the recent downtrend.

“Renovated homes that have everything they need are flying out the door, especially family homes,” Lim said.

But homes had become more difficult to sell, and rising interest rates meant some buyers were now looking for sales with a “finance condition clause” to ensure they could obtain a mortgage.

Fletchers Balwyn North’s Nick Fletcher said homes in the Inner East region also sold amid competition in February and March – particularly those where buyers weren’t forced to compromise.

“Good stocks are still doing very well, but stocks that are compromised need to be evaluated to do justice to the market,” Fletcher said.

He said overseas buyers were returning to the market, albeit not in the numbers agents expected.

“We’re dealing with people who need to do business — those who have recently sold and need to buy or whose circumstances have changed,” Fletcher said. “But I think after Easter it will be quite difficult.

“Another rate hike is going to make it difficult and I think we’re going to see a little bit of blood in the water,” he said. “Hopefully we’ll bottom out in the next few months and stability will come when interest rates stop rising.”

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AMP Capital’s Chief Economist, Dr. Shane Oliver said the improving results could be part of a bump seen in declining markets in the past.

“Even during downturns, it waxes and wanes,” Oliver said. “Prices can rise and then fall again. You could argue that there is an element of that now.”

“Right now there’s some pent-up demand from people who’ve been bargain hunting, they’re being motivated by falling prices,” Oliver said. “A tight rental market and recurring migration could also help stimulate demand during periods of low supply.”

Given the Reserve Bank’s continued rate hikes, Oliver didn’t expect prices to rise any further.

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Ten rate hikes since May last year have already squashed the amount buyers can borrow and increased mortgage payments by thousands.

Some bank economists are forecasting two more rate hikes before pausing, putting even more pressure on the market. Oliver believes prices across the country will fall between 15 and 20 percent from peak to trough.

He said he couldn’t rule out that prices may have bottomed, but it’s unlikely.

“We can’t completely rule out seeing the market bottom, but it really depends on the Reserve Bank and further rate hikes,” Oliver said. “Historically, interest rates have been the most important driver of house prices and we are still a long way from lower interest rates. That’s what counts [these rises] really confusing.”