The Melbourne suburbs where property owners are selling in distress

Home sellers in pockets of Melbourne are dropping prices and saying they “must sell”, as experts warn the number of distressed listings will increase as the property downturn continues.Melbourne City Council, Dandenong and parts of Stonnington and Casey topped the list for distressed listings in Domain data for August, with over 2 per cent of listings in these areas noting sellers were “motivated to sell”, pursuing an “urgent sale”, drawing attention to a price drop or noting a vendor “must sell”.Most areas experienced a small decrease in the share of distressed properties over the past year, despite falling property prices and three rate hikes during the reporting window – with another handed down on Tuesday.AMP chief economist Shane Oliver said distressed listings had remained low overall so far because interest rates had not yet hit a threshold that would cause significant problems for home owners – but that could be set to change.“People have been able to get by with the rate hikes so far, but obviously the longer they stay up at these levels, or go up, the higher the risk. And I think we’re getting closer to that tipping point now,” he said.“I suspect as time goes by, distressed listings will start to go up.”AMP chief economist Shane Oliver said while distressed listings are currently low, this could be set to increase as interest rates hit a threshold that puts pressure on already stretched home owners.DomainVendors in Melbourne City Council – which includes the CBD, Docklands, North, East and West Melbourne, Carlton and surrounds – were the most likely to be looking for an urgent or motivated sale, with 2.4 per cent of listings distressed.Jalin Realty agent Ernest Towle said the market had been falling – particularly units in the CBD and Docklands – for some time, driving sellers to consider their options.“There’s an increasing number of people approaching me that are interested in selling,” he said, noting that investors were often willing to make a loss, hoping to minimise the “pain” of further falls.He said many investors thought they had bought at the bottom of the market, expecting to see a reasonable rental return as prices turned around, only to watch prices drop even further.He said buyers were making offers well below asking price.“They’re [also] making offers on multiple properties at the same time, and waiting to see which property comes back first at the price they want,” he said.In the Dandenong area, 2.2 per cent of listings were considered distressed. Grand Real Estate agent Dr Bhimsen Kurukundi said he found properties in the $600,000 to $650,000 bracket were still selling, mostly to owner-occupier first home buyers, but those at the top end were struggling.“Most of them are owner-occupiers,” he said, and thought cost-of-living increases and rate hikes were forcing stressed owners to downsize.Oliver said the jobs market has been strong, so many households having trouble affording their mortgage have been able to work more hours.But at 4.6 per cent, the unemployment rate is the highest for a few years and appears to be rising, which he thought could mean more problems ahead for home borrowers, with buyers in mortgage belt areas more stretched than those in high-income areas.Kurukundi thought vendors felt more pressure to take lower offers rather than holding out for more in a falling market.“The interest rate hike [on Tuesday] is just another stab in the back,” he said.He thought some investors who were selling had bought recently hoping to make short-term profits, only to find flat growth exacerbated by recent legislative changes. One vendor he knew had spent a significant amount renovating only to find the price roughly the same after owning it for five years.“So there’s not too many properties on the market now, mostly because vendors are worried that they won’t get what they want,” he said.Casey Estate Agents agent Vas Selvaraj said there was an urgency among sellers to “offload” properties in the Casey – South region – where 2.2 per cent of listings were distressed, across suburbs like Cranbourne, Clyde, Rosedale and Tooradin.“I don’t think most people can foresee any growth in the next five years,” he said, despite thinking the area was previously a good investment.He thought rate hikes were only part of the picture, with sellers’ fears compounded by changes to negative gearing and capital gains tax, as well as previous Victorian land tax increases for investors and the war in the Middle East.He said vendors were increasingly willing to cut prices, and was surprised the share of listings considered distressed in Casey was so low.“There’s been a price reduction on more than 50 per cent of my listings,” he said.“And I think there’s still nervousness that it could go down even further. People are still holding off, especially first home buyers.”With Elizabeth RedmanMore:Victoria residential propertyProperty pricesMelbourne house pricesFirst home buyersProperty downsizingProperty upsizingProperty listingsFrom our partners