FY24 Review

If you hadn’t yet pulled out your Melbourne winter uniform (big black puffy jacket), you would have today. Winter is here.

It’s cold, wet, and windy. The Plane trees are bare, the winter solstice is next Friday, and the 2023/2024 financial year is about to close.

It’s been an interesting year, property wise. Positive overall, but having failed to really launch.

I can only speak to the established home market in Stonnington, which is just one small sub-segment of the overall market.

Stonnington is a wealthy municipality within a world class city, with exceptional amenity and highly desirable real estate… Beautiful period homes protected by blanket heritage overlays, in quiet leafy streets. Blue chip.

But even blue-chip real estate has its ups and downs.

You could argue that affluent markets are more resilient to market forces, as there is plenty of wealth sloshing around even when the economy tightens, or interest rates go up. And people will always want to live in Stonnington.

But you could also argue the opposite – that aspirational markets where an entry level family home costs at least $3,000,000 may have more owners who are highly leveraged and, therefore, more susceptible to higher rates and recessions.

I think both are true.

Typically, the more expensive suburbs see bigger prices swings – higher highs in bull markets and lower lows in bear markets.

FY24 started with regained confidence and volume returning to the market. The 12 months preceding had been eerily quiet. When rates went up, people stopped selling.

We saw a 25 – 50 percent decline in volume across Stonnington in FY23 compared to FY22.

But there is only so long that people can put their property plans on hold, so we started to see more activity in Q1 and Q2 with buyers and vendors entering the market with renewed confidence.

It appeared interest rates had peaked, and it seemed like a good time to transact.

This increased volume and confidence continued after the summer break, with February and March being the busiest start to a year that we had seen since 2016/2017.

Team Fetter/Sciola sold 30 houses in February and March alone. More than double what we did the previous year.

Then Easter came early, and the market all but shut down. April was a write off with school holidays and Anzac Day. May was slower than expected, and June is slightly busier than expected.

While we have seen some very strong results over the last 12 months, with prices of some turnkey homes surpassing even the peak of 2021, it has been a mixed bag with some softer prices too.

Some single fronts bought at the peak of 2016 or 2017 have sold for similar prices this year, which equates to negative growth over a seven or eight year period when factoring in inflation, not to mention stamp duty, improvements and selling costs.

Overall, prices have been stable over the last 12 months. We haven’t seen much growth or much decline, if any.

Low or no growth might seem disappointing for Melbourne homeowners on face value, especially when you compare us to other capital cities that have seen double digit growth over the past year. But stable prices make for a good, balanced, predictable market to transact in.

It’s a great time to buy or upgrade. Properties are selling for fair value, which means buyers are getting fair value, and vendors are getting fair value.

The interest rate conversation has shifted again. It’s hard to see mortgage rates dip below five percent anytime soon. Higher rates are here to stay. We better get used to it.

The only other trend worth mentioning for FY24 is that investors are exiting in droves.

There are so many financial disincentives now for owning a rental property – higher interest rates, higher land tax, higher maintenance and insurance costs, higher standards for rental properties, etc.

When you match this with yields that are several percent below what you could achieve, risk free, in a term deposit, and considering the minimal capital growth we have seen in the inner city over the last eight years, it’s no wonder more investors aren’t selling!

As we bunker down for the Melbourne winter, we reflect on a very productive financial year.

We’ve sold 108 homes so far, our second-best year on record for Team Fetter/Sciola.

We’ve seen some extraordinary results, well beyond our vendors wildest dreams in some cases. We’ve also had some more challenging sales, which took much patience and persistence from our vendors.

We certainly can’t complain. It’s been a good market and a good year. Much better than the previous fin year.

We’re privileged to work where we do and be able to help so many great humans navigate the stresses of buying and selling real estate. Many thanks to all our clients for FY24!

We look forward to a busy spring market with some great homes already listed for August.

Feature Property: 4/30 Tintern Ave, Toorak

Disclaimer - This has been written for informational and entertainment purposes only. The views and opinions expressed are the author's own and not those of Jellis Craig.