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Despite a sequence of 13 State or Territory lockdowns so far this year, property prices have been largely unscathed.
This is a stark contrast to last year’s major Victorian lockdown that ran for over four months when Melbourne prices fell 3.3% and even Sydney’s dipped 1.6%, as did Perth’s, by 1.2%.
Despite what is now more than a five-week lockdown and with at least another four to go, the Sydney real estate market is functioning as best as could be expected in the circumstances.
This week, Sydney’s preliminary auction clearance rate was 80.2%, up from last week’s 74.8% Monday-reported estimate, subsequently revised down to 72.8% later last week.
Despite the lockdowns to various degrees across the country this past month, residential property prices continue rising, up 1.6% for the month of July.
This is less than the 1.9% rise in June, all capitals seeing somewhat slower rates of increase, though not dramatically so.
- Sydney property prices have kept moving higher, up another 0.5% this past week, a cumulative 2% for July, on a par with house price growth through this year, a total rise of 17.8%.
- Melbourne house prices rose another 0.4% this past week, up 1.3% in July
- Brisbane house prices increased 0.5% over the last week and 14% so far this year.
Of course, there are headwinds that will slow us down, including concerns about the economic impact that prolonged lockdowns will deliver.
At the same time, the number of properties coming on to the market over the next weeks is likely to keep falling as vendors would not logically plan to list their properties for sale when they can’t get people through their property and the probability of conducting a public auction is low.
It is more like the vendors will hold off until we get to the other side of lockdowns.
Nevertheless, despite the disruption, property values are holding up well as there are more buyers than good properties for sale and this means property values will keep rising.
The number of properties for sale in Australia is still in short supply
The supply of properties for sale just can’t keep up with demand.
Capital city demand continues at a vigorous rate, with buyers out in force – owner-occupiers, investors, and first home buyers – at a time when available supply struggling to keep up.
The table below shows how the stock of advertised properties is well below year-ago levels across all capital cities.
At the same time “time on market” continues to decline.
These are signs that property values will continue to rise moving forward.
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 August 2nd provided by NAB, Corelogic, and realestate.com.au.
What’s happening in our property markets?
The REA Buyer Demand Index
The REA Insights Buyer Demand Index fell 1.7% last week.
According to Paul Ryan, the level of buyer demand is now 10% below the historic-peak recorded in mid-February this year.
Buyer demand continued to decline mildly in New South Wales and Victoria as lockdowns affect activity.
Demand fell by 10% in South Australia as Adelaide entered its lockdown.
Demand for units has increased the most over the past year, with demand for houses broadly flat.
An influx of first-home buyers, as well and investors coming back into the market in 2021, has contributed to the increase in interest for units.
Demand is likely to fall over the coming weeks with lockdown restrictions looking set to continue.
As sellers delay bringing new properties to market until conditions normalise, our measurement of buyer demand will fall, as we saw during lockdowns in 2020.
But later in the year, should this wave of the pandemic be brought under control, we expect a rebound in market activity and buyer demand.
The REA Rental Demand Index
The REA Insights Rental Demand Index, fell 2.7% last week.
According to Paul Ryan, lockdown-affected markets saw large falls, with more renters choosing to delay their accommodation search until restrictions ease.
Rental demand in South Australia fell 9% as Adelaide went into lockdown. New South Wales and Victoria both saw falls of more than 2%. Rental market activity is likely to continue to fall in Sydney as the lockdown draws on.
Tasmania was the only state to record an increase in rental demand in the week, up 2.8%.
Aggregate rental demand is a bit below a year ago, when rental demand recovered after national lockdowns and Australians returned from overseas.
While rental demand remains about 20% below the peak recorded in January this year, the level of demand remains 25% higher than the average over 2019, before the pandemic.
This is surprising given that foreign students – traditionally a strong source of rental demand in inner-cities – remain unable to enter the country.
It shows many Australians are still reassessing where they want to live, and what they want to live in, as the pandemic rolls on.
Median property prices
Vendor metrics confirm we’re in a seller’s market with the number of days to sell a property very low (a sign of the tight supply situation), and vendor discounting (it’s easier for them to sell) at very low levels.
In general, houses are selling better than apartments, but the shortage of good properties on the market is seeing properties selling quickly with minimal discounting.
Our Rental Markets
While rental growth is slowing, we’ve still experienced the highest rental growth in over a decade.
Growth in rental rates eased over the second quarter of 2021, with the national rental index rising by 2.1% over the 3 months to June compared to a 3.2% rise over the March quarter.
While rental growth has slowed over the recent months and quarters, the latest figures take national rental rates 6.6% higher over the year; the highest annual growth in dwelling rents since January 2009.
Regional rents continued to outpace capital city rents over the second quarter of 2021, with regional dwelling rents rising by 2.7% against a 1.9% rise in capital city rents.
This was a 1.4 percentage point reduction in the rate of growth quarter on quarter for the combined regionals, and a 1 percentage point reduction for the combined capital cities.
Despite the easing in growth in recent months, regional Australia recorded an annual rate of rental growth of 11.3% in June 2021.
Last weekend’s auction clearance rates
Auction clearance rates remained surprisingly strong this weekend despite the Covid concerns we’re all facing.
Dr. Andrew Wilson of My Housing Market was tracking 2,203 auctions in the major capitals this weekend, significantly more than last weekend’s 1,944 properties auctioned.
Despite the challenges, all our capital cities delivered solid auction clearance rates with Canberra being the stand-out performer with a preliminary auction clearance rate of 89.9% from the 85 auctions conducted.
Other preliminary clearance rates (as reported by Dr. Andrew Wilson’s Auction Insider) were:-
- Sydney – 79.1%
- Melbourne – 77.6%
- Brisbane – 81.6%
- Adelaide – 89.9%
Source of graphs and data: CoreLogic, NAB and REA and Dr. Andrew Wilson – My Housing Market 5th of July 2021.
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