The capital city residential property markets have started the year strongly.
Prices across our five capital cities notched up some further gains already this month, in what is traditionally a quiet time for our property markets.
The following chart from CoreLogic shows that all property markets other than Melbourne are higher than they were 12 months ago, and Melbourne has made up most of its lost ground and is likely to reach new heights again shortly.
The following chart shows the cyclical nature of our property markets
Melbourne property prices are up 1.32% over the last quarter and are on track to start 2021 strongly as market activity and confidence continues to return.
At their measured low point in mid-October during the lockdown, prices were down almost 6% on pre-pandemic levels and over 3% year to date then.
Prices also rose in Sydney over 2020, up another 1.22% in the last quarter and Sydney’s median property value has risen 2.9% for the year.
While Melbourne prices have been understandably volatile this year and Sydney saw prices cool off after mid-year, prices in Adelaide and Brisbane have been more resilient, though did exhibit some signs of flattening in the September quarter. Adelaide prices have risen 5.7% this year, Brisbane prices by 4.5%.
After a soft start, the Perth market increasingly found its feet as 2020 progressed, prices up a net 1.4%, all of that coming in the second half of the year.
Buyers are back in droves around the country but…
The number of properties for sale in Australia is beginning to dry up.
Currently property buyers are heading back into our housing markets in droves, keen to get a foothold before property values surge.
But they are finding limited stock, with 7 of our 8 capital cities having significantly less properties for sale than 12 months ago.
Strong demand at a time of limited supply must lead to property price growth.
There are now a range of indicators suggesting our property markets are only going to perform strongly in 2021.
- Consumer confidence has been consistently improving as has business confidence
- Auction clearance rates have been consistently strong in the last quarter of 2020, not just in the two big auction capital of Melbourne and Sydney but around Australia
- More buyers and sellers are in the market and transaction numbers have increased consistently.
- At the same time the banks are keen to write new business – another positive for our housing markets.
- Bank loan deferrals have been consistently falling – there’s little likelihood of an avalanche of forced mortgagee sales creating the fical cliff some commentators were worried about.
- Historically low interest rates and the “guarantee” of rates remaining low for at least 3 years, will give home buyers and investors confidence
- Strong job creation, rising consumer confidence and improving business confidence (leading to spending and employment) will underpin our housing markets.
Clearly, our housing markets were not immune to the Coronavirus economic fallout, but those house price predictions of significant falls did not eventuate and now all credible economists have forecast significant house price growth in 2021 and 2022
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 January 25th provided by Corelogic and realestate.com.au.
What’s happening to property prices?
There has been a palpable change in property market sentiment over the last few months.
But there is a flight to quality.
The shortage of A-grade homes and investment properties compared to the number of buyers out looking for them mean that property values in certain locations are steadily 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 by Corelogic on January 25th, 2021.
Properties listed for sale
At a time when as buyers are returning to the market as confidence rises, the overall number of properties listed for sale is down 13.7% over the last year.
This lack of good properties for sale at a time when many interested buyers have returned to the market is one of the reasons property prices have, in general, held up well.
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.
Median property prices
NOW READ: Why Bluechip property will rebound strongly in 2021
Vendor Metrics
Other than in Darwin, vendor metrics have suggested we’re moving into a seller’s market 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.
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.
Auction clearance rates
Sydney
Auction clearance rates finished the year very strongly in Sydney.
At these levels, when around 80% of properties put to auction sell under the hammer three weeks in a row, price growth tends to follow.
There are now firm signs that we’ve passed the bottom of the Sydney property market.
And Sydney property sales remain strong, even though they’ve tapered off a little in the week leading into Christmas as would be expected.
Melbourne
As life in Melbourne gets back to normal, more properties are being listed for sale and auction clearance rates finished the year strongly despite 864 properties being taken to auction, showing the depth of buyer interest.
Melbourne property sales have continued to be strong, reflecting pent-up demand.
This situation is likely to continue as Melburnians get back to a more normal life and their confidence increases.
Brisbane
The Brisbane property market is performing very strongly with the number of sales being significantly higher than pre the Coronavirus pandemic. Brisbane will start the new year with a surge of pent up demand for home buyers and investors.
Here are the long term auction clearance trends
Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on in 2021
If you’re wondering what will happen to property in 2021 you are not alone.
You can trust the team at Metropole to provide you with direction, guidance and results.
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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.
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Source of graphs and data: CoreLogic.
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'This week’s Australian Property Market Update – Latest Data, State by State 25th January' have 23 comments
December 19, 2020 Lisa
Hi Michael, we’ve had a townhouse in Kedron for 5 years that we purchased for $520k and is only valued at $580k. It’s neutrally geared – would you suggest selling to look at land / something with more CG potential or better to hold for longer?
December 19, 2020 Michael Yardney
Lisa – Kedron is a good area but clearly your property has underperformed. There are a number of different neighbourhoods in Kedron some of which do not perform as well as others and obviously some properties in these locations will outperform others. There are too many variables to take into account for me to answer this correctly without a lot more information, but we have some spreadsheets and frameworks we can use to help give you the right answer.if you’d like help making the decision, please email me michael at metropole.com.au and I’ll set things up for you
December 2, 2020 Rod
Hi Michael,
I’m interested to get your thoughts on Newcastle and Hunter Region areas. Newcastle now has the 4th highest median property price in the country. Massive growth opportunity (area) or have people missed the boat?
December 2, 2020 Michael Yardney
Rod, there’s no doubt the Newcastle in the Hunter region great locations to live, but I have found in the past when locations grow too fast, they then revert back.
Just see what happens when Brisbane property prices were almost the same as Sydney a couple of decades ago and are now half of Sydney and similarly when Perth’s median property price was almost the same as Sydney’s and is now half of Sydney’s median price.
At the price you would have to pay to get investment great properties in Newcastle, I think they’re better long-term opportunities elsewhere.
November 17, 2020 Richard Jones
Hi Michael,
In the past couple of days it has been reported an increase of 18% in Perth’s property market 2021 – 2023. After years of negative growth and lowest house prices across the nation, could you provide some comments on why such a big % increase is expected and will it last? – Many thanks Richard
November 17, 2020 Michael Yardney
Richard, I didn’t make that forecast so I can’t really comment. Who did? Possibly “an expert’ chasing a headline.
Don’t believe all the forecast you hear. Think about it – did all those forecasts “experts” made at the beginning of this year come true?
October 13, 2020 Ben
I wish Core Logic would present current statistics, and not ones which are 2-3 months old. A lot has happened since August. I also appreciate that your focus is the big markets of Sydney and Melbourne, but perhaps these posts could improve with a contribution from expert writers who know something about the rebounding regional markets – not just the major state capitals?
October 13, 2020 Michael Yardney
Ben – thanks for your thoughts. Much of this Corelogic data is updated weekly.
You’re right – we don’t cover the the regional market much do we.
October 6, 2020 Linnet Marshall Joseph
I found this blog pretty helpful. It’s really sad to see the kind of impact Covid-19 has had on all the sectors and specifically the real estate sector. I personally feel that the sudden re-appearance of Covid cases in Australia may lead to a further decline in the property prices and may take a while to bounce back. The future is always uncertain and unreliable. Luckily, I came across a real estate agent Broadbeach who is a great advisor with excellent market knowledge. I will be taking his help in making my investment decision for the right property at the right time because the current scenario doesn’t seem to be going well for making investment decisions and without the proper guidance from a real estate advisory help, property investment may be risky.
October 6, 2020 Michael Yardney
Linnet yes it’s a shame what’s happened to our beautiful country – be careful, most Real Estate agents are great at selling properties but very, very poor at giving investment advice. They are not licensed to, nor trained to and should not even ventured down that path. In today’s very challenging market to be careful who you seek advice from
August 5, 2020 Philip
The spike in search for property listings is not due to interested buyers but by an increase in distressed sellers checking out what their failed investment is now worth on READ and how much they have lost. Winter should normally be quiet season for property sales. It is unusual to see an increase in property sales volumes in winter. Can only be explained by distressed sellers
August 5, 2020 Michael Yardney
I can see why you might come to that conclusion by looking at one stat in isolation – that’s why we look at the complete picture and Corelogic and independently Dr. Andre Wilson keep track of buyers and transactions – there ARE more genuine buyers around. REA believes so also becuase they keep coming back to the same property on search
July 21, 2020 Geoff Hadley
With the record levels of existing household debt, falling real wages, rising permanent unemployment, contracting bank credit, declining immigration, contracting GDP, depletion, of superannuation, ineffectiveness of the first home buyer and other assistance schemes (only leads to inflated prices) absence of investors, over supply of units (of dubious quality) abismal rental prospects, 1.2 million vacant properties and a persistent declining world economy, why would I expect the general property market to rise. Granted premium properties will hold up but what about the vast new estates and over valued areas like Perth and Darwin? What happens when the present support schemes finish in Sept or later next year. What happens when the supposed V shaped recovery turns out to be an L with stagflation and real unemployment/under employment >8%. We can’t all afford to buy in Middle Park? And what happens when interest rates rise in the next 5 – 6 years.?
Get real! I would appreciate an answer. Maybe I an wrong.
Geoff
July 21, 2020 Michael Yardney
Thanks for your comment Geoff- I agree with all the issues that you have mentioned – there are a lot of headwinds that will hold back your economy and our property markets.
But there isn’t one Australian property market, and interestingly there are still a number of suburbs where property values are increasing in value, well outperforming the averages (I guess that’s how averages work – some outperform and some are underperform)
I’ve always learnt taking a long-term perspective is important when investing, and I’m not really sure that in this particular blog I suggest of the property market is going to increase in the short-term – in fact I said the opposite.
With regard to your comment about interest rates. I really hope they will increase in a few years time, because the only reason interest rates are going to increase is because our economy will be booming, property values will be increasing, unemployment will be very low and wages will have risen considerably. So the RBA will need to raise interest rates to slow down the boom. that’s the economic cycle
June 2, 2020 Craig Poole
IN todays report you quote “Sydney house values increased by 0.3% last month (+15.8% over the last year)” however the reported data in the ear;y part of the report and the news states that values fell by 0.4%? Can you help me understand the difference between the two stats against the same apparent period.
Thanks
June 2, 2020 Michael Yardney
I update the top section of this blog weekly and the lower half, state by state section monthly
May 16, 2020 ANN HOME
Very informative. Thank you for sharing.
March 24, 2020 Michael
I think that’s about 27 State by State market updates in a row, where you’ve told us there will be a downturn in Tasmania.Which has still yet to eventuate. It’s all good and well that say that the growth has ‘dropped by 2%’ or what have, but when that’s 7% growth down to 5% growth, still out performing most of the country.
May 27, 2020 Long Time Fan Losing Faith
While once a massive Yardney fan, credibility is in question at the moment, and not because you’re not seeing the future (no one can), but for continually stating the boom is over, the markets on the slide, yet as Michael March 24 states, doesn’t eventuate. Surely self-analysing and learning from our errors makes us better at what we do moving forward? Instead of the cut and paste job for Hobart and to a lesser extent Darwin. Perhaps those areas are too far away for you to profit from their investors? It;s also interesting that you pick and choose which graphs some cities appear in. Come on mate, you’re better than that.
May 27, 2020 Michael Yardney
Thanks for letting me know your thoughts.
Yes I don’t comment a lot about Darwin and Hobart, because it’s really difficult to write something different every month about these very, very small market.
While no doubt the re are opportunities in most property markets around Australia, I have only been prepared to “risk” my money in the three big capital cities and that’s the only place we Recommend our clients invest.
Since we don’t have any properties for sale and my only interested in ensuring our clients don’t lose money, going with the big long term trends has stood us well for over 40 years. I’m happy to stand on that track record.
December 25, 2019 Rio Siva
Hi Michael,
I recently read that the Queensland government might bring the following laws which do not favor property owners. Is this true and how likely this is going to happen??
The Queensland Government has announced Stage 1 of its proposed rental reform, with changes to include:
– Forcing property owners to consent to pets
– Allowing tenants to modify properties without consent
– Forcing property owners to renew tenancies indefinitely
– Introduction of minimum housing standards requiring the rental property and its inclusions to meet prescribed standards and to be in a certain state of repair.
Thanks,
Rio
December 18, 2019 Tam
We have recently been looking at Boondall and surrounding suburbs in Brissy and have found that there seems to have been up to a 5% increase in basic entry level properties and even a bigger increases for some quality or well presented entry level properties.
December 18, 2019 Michael Yardney
Sure Tam – but be very careful – entry level properties in this location are NOT likely to be long term “investment grade” properties