This week’s Australian Property Market Update – Latest Data, State by State 26th October

There are continuing signs that our property markets may have hit the bottom.

Steadily improving auction clearance rates in Sydney, with many regions preliminary clearance rates coming in above 80%, are the strongest sign yet that prices are on the rebound.

The Sydney market has been improving in terms of buyer and seller confidence for the last couple of months, which in turns has translated into increasing strength on the ground.

And the Melbourne property market, although much weaker, has stepped up with a surge in listings, auctions and sales.

If it takes the lead from the other capital cities, Melbourne property will have a strong run into the Christmas break.

At the same time the banks are keen to write new business – another positive for our housing markets.

The following table shows what’s happened to property values over the last week, but the overall figures don’t show the pain being felt in certain segments of the property market especially the inner city apartment markets in Melbourne and Sydney.

• Overall Sydney house prices crept up a little in the past week and after a lesser fall of 0.3% in September.
• Melbourne house prices also rose 0.1%, hinting at some stabilisation, though there will be understandable interest in coming weeks as market transaction volumes revive.  
• Brisbane house prices are up 0.4% so far this month, similar in trend to last month’s 0.5% rise
• Rises also evident in Adelaide and Perth, Adelaide having notched up so far the largest rise this year of the five state capitals, up 3.3%. 
• Over the seven months since the initial national restrictions were announced back in late March, prices for the hedonic “five capitals” index are down a relatively modest 2.6%.  Jobs creation, consumer confidence and business confidence (leading to spending and employment) will underpin our housing markets.

The following charts show how the various capital city markets have performed since the pandemic hit and how market sentiment has changed.

 

Clearly, our housing markets were not immune to the Coronavirus economic fallout, but the impact on property values has been minimal so far.

To help keep you up-to-date with all that’s happening in property, here is my updated weekly analysis of data and charts as of October 26th provided by Corelogic and realestate.com.au.

Then further down in this long article, you’ll find a more detailed State by State update using Corelogic’s monthly charts.

Early Market Indicators

Let’s start with the number of indicators that could give us a clue to what’s ahead.

1. Demand for properties for sale nudged slightly higher last week. as shown by realestate.com.au’s Weekly Demand Report.

The REA Insights Weekly Demand Index, which measures high-intent buyer activity on realestate.com.au, increased by 0.4 per cent last week, which was its fourth consecutive weekly rise.

Buyer demand for houses increased by 0.4 per cent while units were up 0.3 per cent.

Cameron Kusher Executive Manager, Economic Research, reports  that  while buyer demand rose overall last week it only rose in the two most populous states, with New South Wales up 0.8 per cent and Victoria up 2.5 per cent.

The Northern Territory (-4.0%) and Australian Capital Territory (-3.2%) experienced the largest weekly falls.

The results were similar for houses with rises in New South Wales and Victoria but falls elsewhere, while for units demand rose in New South Wales, Victoria and Australian Capital Territory but was lower in all other states.

Compared to the historic peak, demand at the end of last week was -3.7 per cent lower, with a decline of -3.8 per cent for houses and -3.6 per cent for units.

Demand is currently -11.9 per cent lower than its peak in Western Australia and -9.8 per cent lower in South Australia, while it is closest to its historic peak in Victoria (-2.2%), Queensland (-2.5%) and New South Wales (-2.8%).

The most populous states are seeing near-record high levels of demand and in New South Wales and Queensland this is being reflected in strong volumes of weekly sales.

In Victoria transaction volumes remain lower than a year ago, however, they are rebounding rapidly as restrictions ease.

Compared to the same week last year, the buyer demand is up 32.8 per cent.

Demand for houses is up 33.1 per cent year-on-year while units are up 31.5 per cent.

The smallest increases in demand over the year were recorded in Tasmania (13.4%) and South Australia (16.7%), while the largest increases were in Australian Capital Territory (53%) and Northern Territory (41.2%).

Each state has recorded a year-on-year increase in demand for houses and units.

Overall we are seeing near-historic high levels in the index, signifying that a relatively high share of searches on realestate.com.au are showing characteristics of buyers that are in the late stage of their purchase decision.

The strength in demand is also reflected in weekly preliminary sales volumes, which as at the end of last week were 11.2 per cent higher so far this year than they were over the same period last year.

The ultra-low borrowing costs are resulting in heightened levels of interest in the residential property market and I would expect this strong demand is likely to continue for the remainder of the year.

While the demand index may fluctuate somewhat week-to-week I anticipate it will remain at near record-highs and perhaps eclipse the previous peak over the coming weeks,” said Kusher.

2. Rental markets.

Realestate.com.au tracks that eased slightly over last week.

The REA Insights Weekly Rental Demand Index, which measures high-intent rental behaviour on realestate.com.au, fell by -0.2 per cent last week, which was its sixth weekly fall in the past eight weeks.

Rental demand rose by 0.1 per cent last week for houses but fell by -0.5 per cent for units.

Despite the slight dip, rental demand rose in more than half of the states last week, with the largest increases in Australian Capital Territory (5.3%) and Tasmania (3.4%) and the largest falls in Victoria (-2.6%) and Northern Territory (-2.2%).

Cameron Kusher Executive Manager, Economic Research explained looking at houses and units, rental demand for houses only fell last week in Victoria and Western Australia, while for units fell in those two states along with Northern Territory.

Rental demand hit an historic peak in May of this year and is currently -16.9 per cent below peak levels.

Demand for rental houses has fallen -19 per cent form peak, while units are down -14.8 per cent.

Australian Capital Territory is the only state or territory in which rental demand is currently at an historic high and Victoria is the only other state where demand is currently less than 20 per cent below its peak (-7.5%). The largest overall declines in rental demand have been recorded in Western Australia (-26.3%) and New South Wales (-24.9%).

Rental demand typically peaks during the first quarter of the year and while demand remains well below its peak it remains 26 per cent higher than this time last year.

Demand for houses for rent is currently 15.7 per cent higher than it was a year ago while demand for units is much greater, up 38.5 per cent.

Western Australia is the only state in which rental demand is lower over the year (-5.3%) while there has been only a marginal increase in Northern Territory (3.4%) on the other hand, large year-on-year increases have been recorded in Victoria (44%) and Australian Capital Territory (42.7%).

Across each state, the year-on-year increase in rental demand has been greater for units than it houses, which is a surprising result.

Given the state of lockdowns and people spending more time at home, I would have thought houses with more space would have been increasingly popular for renters.

Rental demand is much higher than it was a year ago and I expect it will remain such given that rental support is being removed and I believe people will be looking for better rental deals over the coming months.

I will also be watching what happens in terms of demand between houses and units as I wouldn’t be surprised if we see rental demand tip more in favour of houses than units, but there is not yet any real evidence of this occurring” said Kusher

3. Newly advertised properties for sale

The following charts from Corelogic shows the change in the number of new residential listings being advertised for sale.

Clearly there is a surge of new properties listed for sale in Melbourne, but that’s not surprising as the city moves out of lockdown.

 

What’s happening to property prices?

There has been a palpable change in property market sentiment and capital city property values having risen in every state this week.

Certain segments of our markets are holding their values well, with a shortage of A-grade homes and investment properties compared to the number of buyers out looking for them meaning that property values in certain locations are creeping up.

On the other hand B grade (secondary) properties are selling at a discount and no one really wants C grade properties.

The following charts were updated on October 26th, 2020.

There is a flight to quality.

Significant policy support and the earlier reopening of the economy have meant the various “worst-case scenarios of 20-30% price falls” that some of the economists have been touting now seem highly unlikely.

However, I still see property values falling a little further in some segments of our property market as unemployment will remain high and we still have some economic fallout from the recession.

Properties listed for sale

Even though buyers are returning to the market, overall the number of properties listed for sale is down 15.7% over the last year.

The lack of good properties for sale at a time when there are still many interested buyers is one of the reasons property prices have, in general, held up.

This confirms what we are finding on the ground Metropole that well-located properties are selling quickly with a queue of buyers waiting for them.

The number of property transactions

The Coronavirus concerns have caused a very significant slowdown in transaction numbers.

The following table of private treaty sales (which represents the vast majority of all dwelling sales across the country shows that over the last week:

• In Melbourne, 974 houses (last week 704 ) and 449 apartments or units were sold (last week 290). These numbers will continue to pick up now that Melbourne’s lockdown is opening up.
• In Sydney, 1,679 houses (1,694 last week) and 866 apartments were sold (882 last week), so the market is continuing its steady growth.
• In Brisbane, 993 houses (1,180 last week) and 213 apartments were sold (292 last week) – showing a little lull in the otherwise strong demand in the Brisbane market.

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Our Rental Markets

The COVID-19 pandemic has been an unprecedented shock to the rental housing market, reducing demand for rental properties at the same time as supply has increased.

Households most affected by the economic impact are more likely to be renters, and border closures have reduced international arrivals.

The number of vacant rental properties has increased as new dwellings have been completed and some landlords have offered short-term rentals on the long-term market, particularly in inner Sydney and Melbourne.

Government policies have supported renters and landlords.

Rents have declined, partly because of discounts on existing rental agreements and it is likely that rent growth in many areas will remain subdued for some time moving forward.

The absence of new and returning international students and the closing of international borders has dented rental property market, particularly in Sydney and Melbourne.

Compared to pre-pandemic levels, asking rent in Sydney have fallen around 10%, while asking rents declined around 6% in Melbourne.

Vendor Metrics

Other than in Melbourne which was in lockdown, vendor metrics had generally remained steady with the number of days to sell a property decreasing (a sign of the tight supply situation), and vendor discounting) it’s easier for them to sell) at realistic levels.

The shortage of good properties on the market is seeing properties selling quickly with minimal discounting.

Auction clearance rates

There were 1,456 capital city homes taken to auction this week, the largest volume of auctions seen since early April.

According to preliminary figures, of the 1,100 results collected so far, 842 were successful auctions.

This equates to a 76.2% clearance rate, which is higher than last week’s preliminary clearance of 72.4% across a lower 1,131 auctions, later revising down to 66.2% by final collection on Wednesday.

One year ago, a much higher 2,622 capital city auctions took place with a 72.2% success rate.

The increase in overall volumes this week can be attributed to the ramp-up in activity across Melbourne, where 505 homes were taken to auction.

This makes it the busiest week the city has seen since July and also the largest number of auctions held across Melbourne on a grand final weekend historically.

The increase in activity across the city returned a preliminary auction clearance rate of 72.6%, higher than the 65% preliminary figure last week, revising down to 60.2% by final collection.

712 Sydney homes were auctioned this week, of the 551 results collected so far, 80.4% of these were sold results.

Both volumes and clearance rates increased over the week after last week saw a slightly lower 704 homes taken to auction and a final auction clearance rate of 69.1%.

Last year, 771 Sydney auctions were held, returning a final auction clearance rate of 74.3%.

Across the smaller cities, Adelaide and Canberra both returned clearance rates above 80% this week, however, Canberra was the better performer with a higher clearance rate and a rise in weekly volumes.

Of course, the above auction clearance rates were on a relatively very small number of auctions.

Here are the long term auction clearance trends

Regional breakdown of auction results for last weekend:-

The Statistics above are updated weekly.

The following State by State Data is updated Monthly at the beginning of each month

The following commentary is from Tim Lawless is based on Corelogic’s charts provided at the beginning of September 2020.

Sydney Property Market

Source: Charter Keck Kramer

Prior to COVID-19 the Sydney property market was on the move having recorded its quickest turnaround in decades.

But Covid-19 put an end to that!

Sydney home values were down for a fifth consecutive month, however, the rate of decline has been reducing since values fell 0.9% in July.

The September result was down 0.3% which was the smallest drop in values since the pandemic induced downturn commenced.

Since March, Sydney housing values have dropped by only 2.4%, demonstrating some resilience in the face of uncertainty.

Based on the current trend, we may see the Sydney housing market stabilize or even move into positive growth territory over the coming months.

Rental markets haven’t been as resilient, with Sydney rents down 2.8% since March, with most of the downwards pressure coming from the unit sector.

Since March unit rents have dropped by 5% compared with a 1.3% decline in house rents.

Despite the recent weakness, Sydney home values remain 7.7% higher than a year ago.

However over the last month or two there has been a resurgence of buyer and seller interest in the Sydney property market and auction clearance rates have consistently been above 70%.

This implies an improvement in buyer demand and a better fit between buyer and seller pricing expectations.

While A grade homes and investment grade properties are likely hold their values well moving forward, this is a great time for cashed-up investors and homebuyers planning to upgrade to buy a property for considerably less than they will have to pay this time next year.

B grade (secondary) dwellings may still fall in value a little further and C grade properties are likely to have real difficulty finding a buyer.

Sure there are fewer good properties for sale at the moment, and almost all the good ones are for sale off market, however if you’d like to know a bit more about how to find these investment gems give the Metropole Sydney team a call on 1300 METROPOLE or click here and leave your details.

 

 

 

Melbourne Property Market

Source: Charter Keck Kramer

With the virus curve flattening earlier than expected, restrictions across Melbourne are being eased which is likely to see housing activity start pick up through October.

Early indications from CoreLogic platforms are already showing a rise in pre-listings activity as prospective vendors prepare to make the most of a late spring selling season.

Rental markets have also weakened, with unit rents bearing the brunt of the downturn.

Unit rents have fallen by 5.5% since March while house rents are only down by 1%.

Despite the weaker conditions, Melbourne housing values remain 3.1 % higher than they were a year ago, demonstrating the strong capital gains that were present prior to COVID-19.

Since the lockdowns have been loosened, and our property markets are now able to transact, pent-up demand is seeing strong activity form both buyers and sellers

• A grade homes and investment-grade properties in Melbourne are selling quickly – many at full asking price.
• B grade (secondary) dwellings may fall a little further in value and
• C grade properties are likely not to sell at all.

At Metropole we’re finding that strategic investors with a long-term view and homebuyers looking to upgrade are still in the market.

It’s likely that they see the long-term fundamentals, as Melbourne rates are one of the 10 fastest-growing large cities in the developed world,.

Melbourne’s population was forecast to increase by around 10% in the next 4 years.

Clearly this will slow down now, with restricted borders protecting Australia, but once we “cross the bridge” Melbourne will remain one of the most liveable cities in the world.

If you’d like to know a bit more about how to find investment grade properties in Melbourne please give the Metropole Melbourne team a call on 1300 METROPOLE or click here and leave your details.

 

Brisbane Property Market

Source: Charter Keck Kramer

Understandably, the coronavirus crisis is creating uncertainty for those interested in the Brisbane property market, however while Brisbane home values have lost their upwards momentum through 2020, but they’ve held reasonably firm through the past few months.

Looking back over the last few years Brisbane’s property downturn in 2018-9 was quite shallow compared to the big two capital cities and following its recent upturn property values growth has slowed.

Brisbane home values have recorded only a modest decline through the COVID period, with dwelling values down 0.5% since peaking in April, although the historical underperformance in the unit sector means that values remain almost 12% lower than they were in 2010.

Home values edged back into a positive growth in September, following four straight months of decline.

Values were up 0.5% over the month, with both house and unit values lifting.

Rental conditions have seen some divergence between houses and units, with house rents rising 0.2% over the past six months while unit rents are down 1.6%.

Moving forward…while some locations in Brisbane have strong growth potential, and the right properties in these locations will make great long term investments, certain submarkets should be avoided like the plague.

In the long term Brisbane’s economy is being underpinned by major projects like Queen’s Wharf, HS Wharf, TradeCoast, Cross River Rail, the second airport runway and the Adani Coal Mine, but jobs growth from these won’t really kick off for a few more years.

Our Metropole Brisbane team has noticed a continued enquiry with many more homebuyers and investors showing interest in property.

At the same time, we are getting more enquiries from interstate investors there we have for many, many years.

If you’d like to know a bit more about how to find investment grade properties in Brisbane please give the Metropole Brisbane team a call on 1300 METROPOLE or click here and leave your details.

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Now read: Brisbane property market – how will Coronavirus affect it?

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Adelaide Property Market

Adelaide’s home values have remained relatively resilient to falls through the COVID period so far.

Although conditions have lost some steam relative to the pre-COVID trend, we have seen only one of the past six-monthly results post a decline in values.

Between March and the end of September, Adelaide’s home values have risen by 1.6%.

Adelaide’s resilience to lower values can be attributed to the low number of virus cases, but also some insulation from overseas migration as a source of housing demand as well as very affordable housing prices.

Houses are seeing some modest upward pressure on rents, rising almost 1% over the past six months, while the unit sector has seen rents holding reasonably firm, slipping only one-tenth of a percent over the same period.

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Perth Property Market

Perth housing markets moved back into recovery mode in September.

After values reduced between May and July, the market stabilized in August and values pushed 0.2% higher in September.

Preliminary volumes estimates show that sales activity was tracking 11% higher over the September quarter compared with the same period a year ago and 19% higher than the June quarter.

Perth rental conditions are also bucking the national trend of soft to falling rents, with house rents rising 3.3% over the past six months while unit rents are 1.5% higher.

Perth house values remain the lowest of any capital city, with a median value of $463,600.

No doubt this relatively healthy affordability position, along with low-interest rates and large amounts of federal and state government stimulus is helping to attract buyers to the market.

Hobart Property Market

Hobart home values have risen over the past months and dwelling values are now at a record high.

Hobart dwelling values are up by 6.4% in the past year

Rental market conditions haven’t been as resilient, with Hobart rents falling the most of any capital city through the COVID period to-date.

House rents are down 3.1% since March while unit rents are down a larger 5.1%.

The weak rental conditions together with relatively stable home values has caused gross rental yields to compress, declining from a 2019 high of 5.3% to 4.7% in August.

Darwin Property Market

Darwin home values posted an impressive 1.6% rise in September following a 1% rise in August.

The value indices for Darwin show higher volatility than other cities due to the smaller population of dwellings and relatively low number of observations, so the trend results provide a more intuitive read on the market.

The past three months has seen Darwin home values rise by 2.3%, demonstrating an improving trend following a sustained downturn over previous years.

Houses continue to be the main driver of growth, with the unit sector is showing persistently weaker conditions.

However Darwin dwelling values are 29.6% below their record highs reached in May 2014.

Canberra Property Market

Canberra home values remained at a record high in September, defying the broader downturn that has been evident across most other capitals.

Housing values have consistently trended higher through the COVID period, reflecting some resilience in housing demand despite wavering confidence nationally.

Rental markets haven’t been quite as strong, with Canberra rents down 0.8% since March, with a larger 1.5% drop in unit rents recorded.

Our rental markets

Unit rentals experienced the biggest price drop in more than 15 years, marking a historic rent price fall of 3.2% (equivalent to $15 per week) over the June quarter according to Domain.

House and unit rental prices fell across most major capitals, illustrating no city was immune from the impact of coronavirus, with Sydney and Hobart unit rentals hardest hit — both recorded the steepest quarterly fall on record.

More than a quarter of advertised rental properties across Melbourne have had their asking prices slashed in recent months as landlords tried to lure new tenants in the midst of the coronavirus outbreak.

At the same time almost a third of rental properties in Sydney have been discounted since the COVID-19 pandemic hit Australian shores, as landlords battle it out to secure tenants.

Other market indicators:

Vendor metrics have generally tightened over the last few months with the number of days to sell a property decreasing (a sign of falling supply vs demand), vendor discounting decreased  (it’s easier for them to sell.)

 

The RBA dropped “official interest rates twice in March and banks have been lowering their rates to new borrowers in order to “buy” business.

And it is unlikely interest rates will rise for some years.

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Read more (and watch the video): How will COVID-19 impact on your banking and loans?

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And first homebuyers are back into the market, some taking advantage of government incentives while others experienced FOMO, wanting to get into the market before property values start increasing again.

Interestingly, investor activity start the year off slowly and has continued that way.

At Metropole we are finding property investors keen to get into the market, but they’re having difficulty getting finance with the bank and putting more hurdles in the way they never before.

What’s ahead?

It’s hard to make predictions. Especially about the future.

It’s even harder to predict the end point of a moving target.

However there is now a palpable change in the mood in the property market, with more buyers and sellers developing confidence as we work our way through the coronavirus pandemic and out of Australia’s recession.

It has become clear to most of Australia’s property markets are not going to cry and strategic investors are seeing a window of opportunity and  are positioning themselves for the future.

They recognise that there is currently a strategic window to take advantage of the opportunities that always abound after downturns.

As property investors they are working with their consultants to set up a strategic property plan, they getting their financial and ownership structures in place and doing the appropriate research.

They’re not trying to time the market, but they want to take advantage of the opportunities the market is currently and will in the future be offering.

They recognise that how they think and what they do between now and that survival line will determine their level of success when we move on to whatever our new normal will be.

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NOW READ: Is now a good time to buy property?

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In my opinion for those who have a secure job and their finances organised, this is a great time to buy a home or investment property at a price that you were unlikely to be able to get a couple of weeks ago when the property markets in big capital cities were booming and there were more buyers around than sellers.

It is likely that human nature will cause many would-be buyers to sit on the sidelines for a little while until things become more clear, which means that sellers will be more amenable to accepting offers rather than holding out for a top price.

Remember don’t make long-term decisions like buying a home or an investment property based on the last 30 minutes of news.

There is no doubt there will be opportunities in the market for those who are willing to go against the crowd and when they look back in a year’s time and definitely in 5 or 10 years’ time, they will remember the unprecedented events of 2020 as a great buying opportunity for property.

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

If you’re wondering what will happen to property in 2020–2021 you are not alone.

You can trust the team at Metropole to provide you with direction, guidance and results.

In challenging times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s what you exactly what you get from the multi award winning team at Metropole.

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Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is unbiased.

Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.

Please click here to organise a time for a chat. Or call us on 1300 METROPOLE.

Source of graphs and data: CoreLogic.