This week’s Australian Property Market Update – Latest Data, State by State 29th June

Lot’s of property news and data over the last week.

As we come to the end of another month, it is likely that we will see prices slight price falls over the month of June.

All five major Australian capital cities saw prices soften last week by between 0.2 – 0.3%.

The five capital city index is down 0.8% for the month to 28 June.
Melbourne (-1.0%) and Perth (-1.1%) prices have been the softest so far this month, Sydney (-0.8%) and Adelaide (-0.2%) also seeing some overall net decline, Brisbane prices seeing some support this month (+0.5%), clawing back part of the -0.7% declines.

While the number of new homes listed for sale is increasing, more buyers are out and about now searching on line, inspecting properties and making buying decisions.

Property listings for the week to 21 June are tracking close to last year’s levels with more vendors coming into the market, but the number of new properties listed is easing.\

Auction clearance rates in Sydney (66.9%) and Melbourne (62.7%) remain in the 60s.
There was still a segment of auctions withdrawn before auction time, (44 in Sydney and 25 in Melbourne) a further  120 of the Sydney auctions sold prior to sale time, 53 in Melbourne, testament to challenging market conditions.

At the same time rents are being slashed across Australia’s capital cities with one in three Sydney and Melbourne rentals have been discounted in recent months, according to Domain analysis.

The change has been attributed to job losses, paused migration, increased housing stock and dwindling demand.

But last week’s realestate.com.au Weekly Rental Demand Report  data shows that the number of highly-engaged rental listing interactions have increased by 2.7 per cent over the last week.

That means that serious renter activity has now increased for 10 of the past 11 weeks (falling the previous week) and is up 102.9 per cent from its low in March.

The 2.7 per cent weekly increase did not completely offset the -4.3 per cent fall the previous week.

One of the likely drivers of such high volumes of serious renter activity is the fact that the number of new rental properties becoming available is shrinking.

With less stock, those serious about renting are required to narrow their focus and are more likely to be highly-engaged with what’s available online.

 

Amongst all the bad news that we keep receiving, the good news is that Australia’s property market look like they’ll be in for a softer landing than projected by the property pessimists.

CoreLogic head of research Tim Lawless recently said:

“Considering the weak economic conditions associated with the pandemic, a fall of less than half a per cent in housing values over the month shows the market has remained resilient to a material correction.

“With restrictive policies being progressively lifted or relaxed, the downwards trajectory of housing values could be milder than first expected.”

While we are all keen to keep up-to-date with what’s happening to the latest property market statistics, it should be noted that on the current low volumes of sales, volatility is more likely in these price measures and they should be treated with caution

However, to help keep you up-to-date, here is my updated weekly analysis of data and charts provided by Corelogic, and further down in this blog you’ll find a more detailed State by State update using Corelogic’s monthly June 2020 charts .

Early Market Indicators

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

1. Strong buyer demand shown by realestate.com.au’s Weekly Search Report

The number of searches for properties for sale on realestate.com.au fell by -1.3 per cent last week, the first weekly fall in search volumes in 13 weeks.

Despite the weekly fall in for sale searches, search volumes have increased by 71.2 per cent from their recent low and are up 45.5 per cent higher than a year ago.

All states and territories recorded a fall in for sale search volumes last week, with the largest declines in Australian Capital Territory and South Australia while the most moderate falls were recorded in Victoria and New South Wales.

Certain states have seen for sale search volumes fall for a number of weeks with Western Australia and Queensland having recorded the largest overall falls since their peak.

Despite this, year-on-year for sale search volumes are up across all states with the largest increases recorded in Western Australia and Australian Capital Territory and the smallest increases in Tasmania and Northern Territory.

Following 13 consecutive weekly increases it was almost inevitable that for sale search volumes would fall sooner rather than later. In saying this volumes remain at near record highs, which indicates interest in properties for sale remains high

 

Our rental markets have been soft this year.

Realestate.com.au tracks the number  of rental searches on its portal and reports that following three consecutive weeks of rental search falls, volumes increased by 2.3 per cent last week.

While rental demand is overall reducing, it is clear people are still actively looking at rentals, potentially looking for cheaper accommodation.

Despite the declining trend, search volumes last week were are still 55 per cent higher than their recent low and up 17.9 per cent year-on-year.

Western Australia and Tasmania were the only states in which rental search volumes increased last week, while Australian Capital Territory and Queensland recorded the largest falls.

All states and territories have recorded a fall in rental search volumes from their recent peak with the larges falls being recorded in Northern Territory and Queensland.

Although there has been some recent weakness in rental searches, last week they were higher than they were at the same time last year across the board with Australian Capital Territory and New South Wales recording the largest increases and South Australia and Tasmania recording the smallest increases.

Rental search volumes have now developed a declining trend, which is no real surprise given that supply of stock for rent is falling, rental moratoriums remain in place and overall rental demand is being reduced both by the Federal Government’s HomeBuilder package and the closed international borders.

What’s happening to property prices?

Considering all the negative market sentiment,  capital city property values have held up pretty well.

As the following table from Corelogic shows property values are slipping a little, but clearly this doesn’t show the full picture.

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 want’s C grade properties. 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 property values falling a little further as unemployment will remain high, consumer confidence will continue to languish and immigration will fall.

Obviously the strong market momentum seen at the beginning of the year has now disappeared.

What’s ahead now that the COVID-19 Cocoon is opening up?

Let’s start with the number of new residential listings being advertised for sale.

‘New’ listings means the count is of listing events that have not so far been seen in the current calendar year.

This measure provides insight regarding the volume of new properties coming on to the market.

An increase in new listings suggests an increasing supply of stock available, and higher seller or lessor activity.

And a positive sign is that vendors seem to be gaining a little confidence, and a few are starting to are bringing their homes onto the market for sale.

 

The following table shows the total number of properties for sale around our capital cities.

Even though sellers are returning to the market, overall the number of properties listed for sale is down 18% over the year.

The number of property transactions

The Coronavirus lockdowns have caused a very significant slow down in transaction numbers.

The following chart of private treaty sales (which represents around 85% of all dwelling sales across the country) shows that over the last week:

• In Melbourne 1174 houses (last week 1113) and 610 apartments or units were sold (last week 583) – so a few more sales occurred than in the previous week.
• In Sydney 1123 houses (1012 last week) and 600 apartments were sold (524 last week), so the market is continuing its steady growth.
• In Brisbane only 714 houses  (532 last week) and 167 apartments were sold (122 last week) -so the market has become considerably more active than a month ago.

 

---

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

---

Vendor Metrics

Vendor metrics had generally improved in the first quarter of the year with the number of days to sell a property decreasing (a sign of the tight supply situation), vendor discounting decreasing (it’s easier for them to sell)

The shortage of good properties on the market in Sydney and Melbourne are seeing properties selling quickly with minimal discounting.

But now that discretionary sellers are out of the market and the number of new properties listed for sale has falling significantly, we’ll watch these metrics carefully as they are a good indication of supply and demand.

It is likely that these metrics will show start to show that it takes longer for a property to sell and the vendors will require to offer a higher discount to affect a sale, especially for secondary properties.

Auction clearance rates

Almost two thirds of all properties put to auction sold on Saturday.

There were still a volume of properties sold before the scheduled auction time, still suggestive of some hesitancy on the part of vendors thus seeking more certainty over getting sales done in the current market.

Sydney delivered a strong preliminary auction clearance rates of 62.6%, but this was down a little from last week

According to Corelogic, Sydney houses were more likely to sell at auction than units (see chart below).

The clearance rate for Sydney houses was 70.4% , while 64.2% of units sold at or before auction.

The Melbourne auction market is now starting to gain momentum and also delivered a solid preliminary auction clearance rates of 61.7%

There were 1,019 capital city auctions scheduled this past weekend, revealing significant improvement from the lockdown lows and much the same as the same week of last year (1,190 auctions.)

 

 

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

 

 

Here is a regional breakdown of auction results:-

 

The Statistics above are updated weekly.
The following State by State Data is updated Monthly at the beginning of each month

My commentary below is based on Corelogic’s charts provided at the beginning of June 2020.

Sydney Property Market

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

But Sydney home values recorded their first month on month decline in a year, with values down 0.4% in May.

Since bottoming out after the election in May, Sydney dwelling values have recovered and are up 14.3% over the past year.

• Sydney house values decreased by -0.6% last month (+15.6% over the last year)
• Sydney unit values decreased by -0.1% last month (+11.6% over the last year.)

Weakness was mostly evident across the top quartile of the market where values were down by 0.6% over the month compared with a 0.1% rise in the lower quartile values.

Softer conditions across the most expensive end of the market come after a solid over performance.

The past twelve months has seen the top quartile of home values surge 16.5% higher while growth across the lower quartile was substantially lower at 9.6%.

Despite the fall in values, there were some more positive signs that housing markets were responding to an easing in restrictions.

Buyer activity was up by 29% over the month, partially recovering a 41% drop in activity through April, and auction clearance rates had improved from the low 30% range in mid-April to the mid 60% range by late May.

Rental markets are likely to see weaker conditions due to the reduction in migration rates and less student demand, as well as a short term rental stock transitioning into the permanent rental pool.

While A grade homes and investment grade properties are likely to fall a little (- 5- 10%) moving forward, this is a great time for cashed-up investors and homebuyers planning to upgrade to buy a property considerably cheaper than they would have had to pay a few months ago, and for considerably less than they will have to pay this time next year.

B grade (secondary) dwellings may fall in value by 10-15% and C grade properties are likely not to sell at all.

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

Before Coronavirus hit our markets, Melbourne property prices were surging with dwelling values up 12% higher to reach new highs.

However, Melbourne home values were 0.9% lower in May, following a slight fall in April, taking the cumulative drop in values across the city to 1.2% from the record highs set in March 2020.

• Melbourne house values dropped -1.1% last month (+12.2% over the last year.)
• Melbourne unit values decreased – 0.6 last month (+10.6% over the last year.)

The monthly fall comes after a strong rebound in housing values since June last year which saw Melbourne dwelling values reach a new record high in February.

Similar to Sydney, Melbourne’s weakest housing market conditions are confined to the most expensive quartile of the market where values were down 1.3% over the month and 2.1% lower over the past three months.

Although values are falling faster at the most expensive end of the market, this is also the sector that has shown the strongest growth trajectory over the past year, with values still 14% higher than they were a year ago compared to a 9% lift in values across the most affordable quartile.

Although values are still trending lower across Melbourne, the number of home sales was up 13.5% in May as listing numbers rose and homebuyers became more active. 

Rental markets are likely to experience weaker conditions relative to home values due to higher supply of rental properties, and less demand.

Like in Sydney, A grade homes and investment grade properties in Melbourne are likely to fall a little  (5- 10%) moving forward.

B grade (secondary) dwellings may fall in value by 10-15% 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, picking the eyes out of the off market properties.

It’s likely that they see the long-term fundamentals as Melbourne rates as 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

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.

However, Brisbane property prices are still about 55% of Sydney’s while household incomes are only around 12% lower, underpinning the value of Brisbane real estate.

• Brisbane house values remained steady over the last month (+4.8% over the last year.)
• Brisbane unit values increased 0.5% last month (+2.1% over the last year.)

The monthly pace of growth has faded from a recent high of 0.8% late last year to slip into negative growth territory in May, down 0.1%.

The local unit market continues to show a weaker trajectory for home values.

The unit sector recorded a 0.6% drop in value last month while the house was steady.

Similarly, the past twelve months have seen house values rise by 4.3% while unit values are up a smaller 1.6%.

In a positive sign of buyer confidence and an easing or removal of some of the COVID related restrictions, sales activity jumped by 22% in May.

But what’s going to happen to the Brisbane housing market moving forward?

With less reliance to overseas migration as a source of housing demand and the largest number of interstate migrants, the Queensland market may be less exposed to downwards pressure in housing values.

Of course Queensland is highly exposed to the Chinese economy, in particular tourism, education and foreign property purchases.

On the flipside, once travel bans are lifted, the Queensland economy and property market should benefit from more local travel by Australians as it is likely that overseas travel will still be restricted.

Not all Brisbane property will be impacted equally.

Clearly there is not one Queensland property market.

Regional Queensland is likely to suffer more while the Brisbane real estate market is underpinned by multiple pillars, and therefore likely to suffer less than areas like the Gold Coast and Sunshine Coast or regional Queensland.

But even Brisbane does not have ‘one’ property market.

Based on the predicted pace of the post-recession recovery, I would expect the pandemic to have a more limited and shorter-lived impact on house prices than either the early-1990s recession or the Global Financial Crisis.

Just to make things clear…I have confidence in the long term future of the Sunshine State capital.

Brisbane is one of the world’s great cities.

Liveability, affordability, scale and future economic prospects all suggest that Brisbane is a market where you can confidently buy.

While it’s true that once we come through the Coronavirus pandemic Brisbane is likely to be the one of the best performing property market over the next few years, there is not one Brisbane property market.

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.

---

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

---

Adelaide Property Market

Adelaide was one of the few housing markets to record a rise in housing values through May.

• Adelaide house values increased 0.4% last month (+1.7% over the last year.)
• Adelaide unit values increased 0.5% last month (+2.1% over the last year.)

The strongest conditions over the month came from the Western suburbs where values were up 1.1% in May, while the more affordable northern suburbs were the only sub-region to record a drop in home values, down 0.2% in May.

Overall, the Adelaide housing market looks to be tracking with relative stability, following a period of moderate gains through late 2019 and early 2020.

Historically, the Adelaide dwelling market has seen less volatility than larger, more expensive capital city housing markets.

This stability in asset growth, coupled with relatively strong yields, are a drawcard for the dwelling market.

Of course, Adelaide will not be immune to the coronavirus led recession, particularly as it does not have multiple pillars supporting it economy.

Headwinds for the market include weak labour force conditions, with South Australia presenting the highest rate of seasonally adjusted unemployment in April at 7.2%.

 

Perth Property Market

It looked like the Perth market was finally starting to pick up.

Perth home value were down 0.6% in May, breaking a six-month streak where housing values avoided a fall.

Each of Perth’s sub-regions recorded a fall in home values over the month, ranging from a 1.7% drop in Mandurah to a virtually flat 0.1% fall across the most expensive Inner region of the city.

• Perth house values fell -0.6% last month (-2.1% over the last year.)
• Perth unit values fell -0.1% last month (-1.9% over the last year.)

While housing values slipped lower over the month, activity recorded a solid rise, entirely recovering the April fall.

Improving commodity prices, low advertised stock levels and a trend towards rising interstate migration should help to support the Perth housing market over the medium to long term.

Rents bucked the weakening trend, rising 0.4% in May, pushing Perth’s gross rental yield to the highest level since October last year.

.

Hobart Property Market

Hobart was the darling of speculative property investors and the best performing property market in 2017- 8, and while dwelling values reached a record high in February 2020, its boom is now over and values fell slightly in March and April.

However Hobart houses and units exhibited a slight rise in May.

• Hobart house values increased +0.8 last month (+6.7% over the last year.)
• Hobart unit values increased 0.6% last month (4.4% over the last year.)

It’s likely the Hobart market will continue to lose its momentum over the year as its local economy is very dependant on tourism which is a sector of the economy that will suffer more than most.

Darwin Property Market

The Darwin property market peaked in may 2014 and is still suffering from the effects of the end of our mining boom with a very soft employment market and lack of migration and infrastructure spending.

Finally Darwin property values started to increase earlier this year, but values slipped again in May.

Currently values are 31.3% below their historic peak and it is unlikely we’ll see these types of house prices again in the next decade.

• Darwin house values fell -0.9% last month (-1.6% over the last year.)
• Darwin unit values fell -2.9% last month (-4.5% over the last year.)

The small size of the Darwin market makes it more susceptible to local events and Darwin typically has a higher and more variable vacancy rate, a product of a large transient working population.

Darwin does not have significant growth drivers on the horizon and would be best avoided by investors.

Canberra Property Market

Canberra’s property market has been a “quiet achiever” with dwelling values having reached a new peak after growing 4.7% over the last year .

Considering a large percentage of Canberra population is employed by the government or industries supporting the public sector, Canberra’s property market is less likely to be affected by the upcoming recession than our other capital cities.

• Canberra house values increased 0.7% last month (+6.3% over the last year.)
• Hobart unit values increased 0.1% last month (+0.9% over the last year.)

Our rental markets

Following a number of years of sluggish rental growth, rents had been rising earlier this year and the team at Metropole Property Management were getting a record number of rental enquires.

While leasing enquiries are still there and inspections of properties can occur again, vacancy rates have risen, particularly in and around the Sydney and Melbourne CBD’s and this is causing rent to fall.

Other market indicators:

Vendor metrics had generally improved over the first quarter of the year with the number of days to sell a property decreasing (a sign of the tight supply situation), vendor discounting decreasing (it’s easier for them to sell) and auction clearance rates started the year on a very strong note.

But now, it is likely that these metrics will show start to show that it takes longer for a property to sell and the vendors will require to offer a higher discount to affect a sale, especially for secondary properties.

 

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

---

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

---

 

 

And first homebuyers were back into the market early this year, some taking advantage of government incentives while others experienced FOMO, watching property values increase faster than they could say for the deposit.

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

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.

Yet, as someone who’s meant to know a bit about our property markets, I’m regularly asked how all this is going to play out?

What’s going to happen to the property markets? Are house prices really going to crash like those doomsayers keep telling us?

Of course, I realise there are some commentators out there making predictions; but my answer is – I really don’t know!

I realise that’s not a satisfactory answer.

By the way…no one else really knows the answers either!

Yet at a time like this, most of us are looking for someone to tell them what’s going to happen next.

Of course I wish I had the answers.  I really do.

All I can say is I don’t know.

I don’t know how this virus is going to play out, how long we’ll be in lockdown or what the economic fallout will be.

But there are a few things I do know and I suggest you read this blog to understand what’s ahead: Coronavirus crisis: I have no idea what will happen to property prices!

What I do know is that once we cross the proverbial bridge that the government is building for us, a property market will rebound again as they always have.

I also know that there’s a group of strategic investors and business owners who are positioning themselves for the future.

They recognise that there is currently a strategic window, the time between now and that survival to get set to take advantage of the opportunities that always abound after severe 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.

These strategic investors know that people will eventually come out of lockdown and want to get on with their lives.

These strategically focused investors know it looks bad today, it might even look bad tomorrow, but they’re prepared to hang in there, they’re prepared to lay the foundations for their future success.

Despite the headlines, they know that the world will not going to end. They are prepared to bet on humanity.

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.

---

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

---

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.

Why not get the independent team of property strategists and buyers’ agents at Metropole to help level the playing field for you? We help our clients grow, protect and pass on their wealth through a range of services including:

1. Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now! Click here to learn more
2. Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property.  Click here to learn how we can help you.
3. Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
4. Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.

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.