This week’s Australian Property Market Update – Latest Data, State by State 1st March

House prices surged across Australia through the month of February.  

In fact price growth is accelerating with Corelogic reporting they haven’t seen property values grow this fast since 2013.

Dwelling prices grew nationally by 2.1% in the month of February, but this doesn’t reflect the granular nature of our property markets where in some locations property values grew considerably more.

Sydney property prices rose 2.5% in the last month – up 3.6% in the last quarter and Sydney’s auction market remains strong clearing well over 80% of auctions for the fourth week in a row, with volumes pushing higher too.

Melbourne property prices rose 2.1% in the month of February, up 3.5% in the last quarter  including 0.6% this week, and weekend auction clearance rates remained strong for last weekend’s Super Saturday of auctions. Melbourne is still making up price falls during last year’s extended lockdown and down 1.3% in annual terms.

Brisbane, Adelaide, and Perth prices all made strong gains over the last month.

 

The number of properties for sale in Australia is beginning to dry up.

At the time of increased demand, buyers are finding a lack of good properties available for sale which is leading to FOMO (fear of missing out).

It will be interesting to see how potential sellers respond to the higher prices and if this increases the number of new property listings.

The charts below show how the number of new properties coming onto the market (listings) are slowing down.

Maybe sellers are holding back wondering if they can get more for their properties later on down the track, while other sellers are probably keen to buy first in this fast moving market and therefore holding back putting their properties up for sale.

Either way…strong demand at a time of limited supply must lead to property price growth.

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 February 22nd provided by NAB,  Corelogic, and realestate.com.au.

What’s happening in our property markets?

The REA Buyers Index

The REA Insights Buyer Demand Index which measures the volume of high-intent buyers on realestate.com.au, rose by 3.1% last week, hitting a new record high.

According to Cameron Kusher, demand increased across all states and is at record levels in New South Wales, Victoria and Queensland.

 Compared to the same time last year, demand for properties for sale is up 45.1%, Kusher said:

At a national level, year-on-year demand is trending quite flat. Looking at the specific states demand is trending lower in Victoria, Western Australia, Northern Territory and Australian Capital Territory and trending higher in Queensland and Tasmania.

Sales volumes continue to climb each and every week and are now at levels similar to those seen in spring of last year.

At the same time the stock of properties listed for sale remains quite low.

As a result we expect the strong demand for properties for sale to persist over the coming weeks.

The REA Rental Demand Index

The REA Insights Rental Demand Index which measures the volume of high-intent renters on realestate.com.au, fell by -0.8% last week.

According to Cameron Kusher, rental demand fell last week across most states, with Victoria and South Australia the only states that saw an increase.

Rental demand is now -11% below peak and lower across all states.

Although rental demand is trending lower, this is an occurrence we see each year.

Further, rental demands remains considerably higher than a year ago, up 22.2%.

Rental demand is higher than it was a year ago across all states, however, we’ve seen the largest increase in Victoria, which was the market that was also most heavily impacted by COVID-19 last year.

The market is continuing to move out of the busiest time of the year and, as a result, I expect demand to continue to fall in coming weeks.

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 means 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.

Properties listed for sale

At a time when buyers are returning to the market as confidence rises, the overall number of properties listed for sale is down 18% 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

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Vendor Metrics

Vendor metrics suggest we’re 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

Corelogic report as follows….

The disparity in rental markets across Australia has been extreme.

At one end of the spectrum we have extremely tight rental conditions in cities such as Perth and Darwin where both house and unit annual rental growth is above 10%.

At the other end are the unit rental markets of Sydney and Melbourne where rents have plunged over the last year, down -5.3% in Sydney, and -8.0% lower in Melbourne.

In a similar vein to housing values, rental markets are stronger within the detached housing sector relative to the unit sector.

Tim Lawless research director of Corelogic explains…

“The strength in Perth and Darwin’s rental sector can be attributed to a mix of low supply, due to a recent history of low investor participation, and rising demand as interstate migration trends move into positive territory.

The opposite trends in Sydney and Melbourne have seen rental markets weaken; higher rental supply due to a recent history of investor exuberance, weaker demand from negative interstate migration and, more recently, a demand shock from closed international borders where Melbourne and Sydney were the primary recipients of migrant arrivals.

However, the weak conditions across Sydney and Melbourne unit markets look to be turning.

Sydney’s rental index for units has recorded two successive months of mild rises, while Melbourne unit rents edged higher in February after falling for nine of the previous ten months.

The improvement in unit rents across Australia’s two largest cities is likely to be at least partially seasonal as demand from domestic students generally rises early in the year, but could also be attributable to more people returning to work in the inner cities as well as workers in some of the hardest hit industries such as hospitality, food and accommodation services returning to employment.

Until international borders re-open and migration rates return to their pre-COVID levels, a more substantial improvement in inner city apartment rents is unlikely.”

Weaker rental conditions in Sydney and Melbourne relative to rising home values is evident in the gross rental yields, with yields across both cities falling to fresh record lows in February.

Gross rental yields in Sydney were recorded at 2.9% at the end of February, while in Melbourne yields averaged 3.0%. Every other capital city is recording gross rental yields around the mid-4% mark or higher, implying positive cash flow opportunities are more likely in these markets.

 

Auction clearance rates

Just under 2,500 homes taken to auction across the combined capital cities.

There were 2,451 homes taken to auction across the combined capital cities this week, up from 2,128 over the previous week, although lower than this time last year when 3,026 auctions were held.

Of the 2,053 results collected so far, 81.9 per cent reported a successful result, down from last week’s preliminary auction clearance rate of 84.4 per cent, which revised down to 79.6 per cent at final figures.

Over the same week last year, 73.9 per cent of reported auctions were successful across the combined capital cities.

The final auction clearance rate has held above 75.0 per cent since auction reporting re-commenced in late January after the seasonal slowdown and this week will likely be no exception despite higher volumes.

In Melbourne, 1,273 homes were taken to auction this week, compared to 1,095 over the previous week and 1,612 this time last year.

Of the 1,091 auction results collected so far, 77.7 per cent were reported as successful, down from the previous week’s preliminary clearance rate of 82.2 per cent, which revised down to 77.4 per cent at final figures.

This time last year, 74.8 per cent of reported auctions were successful. Sydney was host to 844 auctions this week, increasing from 768 over the previous week, although lower than this time last year when 1,087 homes were taken to auction across the city.

The preliminary clearance rate came in at 88.9 per cent this week, up slightly from the previous week’s preliminary clearance rate of 88.2 per cent, which revised down to 83.4 per cent at final figures.

This time last year, 76.6 per cent of reported auctions were successful.

It is likely that Sydney’s final clearance rate will come in around the low to mid 80 per cent range for the 4th consecutive week.

Across the smaller cities, Canberra recorded the highest preliminary clearance rate at 84.7 per cent, followed by Adelaide (82.5 per cent) and Brisbane (79.0 per cent).

 

 

 

Now is the time to take advantage of the opportunities that will present themselves as the market moves on in 2021

Sure the markets are moving on, but not all properties are going to increase in value. Now, more than ever, correct property selection will be critical.

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.

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.

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Source of graphs and data: CoreLogic.