The unexpected group of buyers driving up house prices
At a time when demand for homes is so high, and supply so low, it can be a battle to upgrade to a bigger, better property.
However, especially with COVID-19 forcing us to spend more time indoors, there are more prospective buyers than ever dreaming of the respite of a lovely backyard, more space at home to give us a break from our nearest and dearest, and extra room for a study area to allow us to work comfortably.
“It’s the upgraders who’ve been the driving force behind the incredible rises in this market,” Domain’s Chief of Research and Economics, Nicola Powell, says. “We have such low interest rates and credit is so cheap, and at the same time, with COVID-19, we’ve been using our homes differently, and working from home.
“So, home-owners have looked at their homes and decided now is the time to either renovate or upgrade. The fact that prices are rising so fast means affordability can sometimes be a disincentive but, at the same time, capital growth is so strong, people think the gains will outweigh the cost.”
For Jette and Jon Doherty, it was more that they’d outgrown their house in Highett, in Melbourne’s south-east. When they’d bought and moved in 12 years ago, there was only the two of them. Now, with daughters Isabella, 12, and Helena, 10, they really felt as if they needed more space.
“We’ve been looking for a few years to upgrade so we would have more room and be closer to the beach,” says Jette, 45, a digital experience and design senior manager. “We always thought our house would be a stepping-stone to somewhere else, and finally we felt that time had come.
“Our children are getting bigger and it would be nice if we had more space so they could bring home their teenage friends and have their own space. COVID delayed things a bit but, in the end, we took on a buyer’s advocate to help us.”
Sarah Ross from Longview Real Estate was only too happy to lend a helping hand. Even though there’s so little stock currently on the market, she was able to find out exactly what Jette and Jon, 53, were looking for and then track down something that would suit them.
Related: Push to protect houses of the ’70s and ’80s: Two examples to prove why it’s important
Related: How these 15 new Northcote houses are set to have a huge impact
Related: First-home hopefuls set to save cash in new lockdowns – if they can keep their jobs
“The majority of my clients at the moment are family home upgraders,” Ross says. “I think a lot of people are looking at their homes differently after spending so much time locked down in them.
“People now want extra rooms so they can have home offices, and usually a backyard for the kids. And with interest rates so low, it’s the ideal time …”
The Dohertys ended up buying a five-bedroom townhouse Ross found for them in Sandringham, with room to install a pool in the garden.
There are many reasons that people upgrade their homes. They might have a growing family and need more space. They might now be working from home more regularly, and are looking for a dedicated study rather than labouring at the dining table or kitchen bench, too close to temptation in the fridge.
They might have bought a new pet during COVID and now want a backyard or to be closer to a park. Or they may simply want to live in a suburb closer to town, with more restaurants, bars and cafes.
Mortgage Choice broker George Boustani says COVID-19 has been a big motivator.
“People now want something with an outdoor space or a courtyard for children [or] pets, or to entertain with a barbecue,” he says. “They need more space, too, with working from home. Many are nervous about more lockdowns and don’t want to be stuck in a small unit if it happens.
“At the same time, the Reserve Bank of Australia says savings have gone up dramatically and consumer spending has dropped, with none of us travelling overseas. So, a lot of people have equity and savings and are more confident about taking that next step up the property ladder.”
Lorri Hill is another who’s just upgraded, this time from a one-bedroom unit to a bigger, two-bedroom apartment in a new block, and is thrilled.
“As soon as I walked in, I knew this apartment was what I needed,” says Hill, 67, who is from a nursing and hospitality background.
“It’s perhaps only a third bigger, but it’s on the fifth floor and has big windows and beautiful views of the Dandenongs and right around to the city. It’s like the sky becomes part of a living, moving artwork. I felt I could spread my arms out here.
“As well, there’s a lovely rooftop garden which is a place where you can bump into your neighbours, and we’ve become a real little community, which feels so nice. I absolutely love it here, and I’m so happy I upgraded.”
Lorri’s new apartment is in the Brunswick development Breese Street by Milieu, designed by DKO and Breathe Architecture. She wanted a building with a good security system, which this has, and likes the way her floor has only three other apartments on it. She now has room to set up an office and has a sofa bed for when family visit.
Because it’s by the same developer as her previous unit – Milieu Property – she had peace of mind about the quality of the build, having checked the company’s bona fides earlier.
“I was in the fortunate position of being able to buy and not be dependant on the sale of my other place,” Hill says. “But the low interest rates definitely help people upgrading to a bigger place.
Upgraders currently outnumber all the other types of buyers in the market, such as first-home buyers, downsizers and investors, by, some experts suggest, a factor of at least two.
“Even the investors are looking to upgrade, choosing two-bedroom homes to buy instead of one,” Stephanie Evans of Belle Property in South Melbourne says. “I think COVID last year means everyone is now looking for more space, with the usual two-bedroom-buyers looking for three.
“Also, some people saved more money last year so their budgets have increased, which is helping them too.”
And even when they don’t have the extra cash, they’re finding it cheaper to borrow, with the record-low interest rates.