Residential property market momentum has continued to surge through the start of April.
As we hit the middle of the month we can see the five capital cities have already eclipsed last month’s 2.1% gain, rising 2.8% so far.
We’re well on track for double-digit growth this year with some markets likely to achieve this much sooner than the end of the year.
And while our auction clearance rates have fallen a little, they still remain above long-term averages.
Positive market momentum was not stifled at all by a lift in auction numbers to the busiest weekend for a number of years.
Sydney’s auction clearance rate remained very punchy at 89.1%, clearly remaining at if not even higher than the trend seen over recent weeks.
Melbourne’s preliminary auction clearance rate moved a tad higher at 83.8%.
A sense of FOMO — fear of missing out — continues to be a major factor in spurring housing markets across the country, as buyer demand well outweighed available housing supply.
Property prices in our 5 Capital Cities have risen 0.6% this month but, as always, results vary around Australia.
Sydney property prices rose 0.5% in the last week alone – up 6.3% in the last quarter and Sydney’s auction market remains strong clearing well over 90% of auctions in many parts of the city.
Melbourne property prices rose 0.2% last week, up 4.9% in the last quarter and weekend auction clearance rates remained strong over the weekend.
Brisbane, Adelaide, and Perth prices all made strong gains over the last month.
The number of properties for sale in Australia have seasonally peaked
Listings seem to have (seasonally) peaked into the winter recess, though prospective new supply seems to be holding up stronger in Melbourne and Perth, the former still possibly playing some degree of catch up while the Perth market more fully wakens after its multi-year slumber.
The chart below from NAB shows that the supply of new properties coming on to the market was following the seasonal pattern and levels of new listings of recent years, with the notable exception of Perth and partly Melbourne.
At annual year-to-date growth of 1.4% for the 28 days to 12 April, new Melbourne property listings are hardly breaking any speed records.
In the case of Perth, listings are up a sizeable 34.3%, but from a low base from what was the tail end of a property market on the back foot for almost a decade.
It will be interesting to see how potential sellers respond to the higher prices and if this increases the number of new property listings.
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 April 12th provided by NAB, Corelogic, and realestate.com.au.
What’s happening in our property markets?
The REA Buyers Index
The REA Insights Buyer Demand buyer demand remains heightened but has been trending lower in recent weeks.
According to Cameron Kusher, the fall in demand over the week was uniform, with falls recorded in every state and territory.
Perhaps a little surprisingly, demand for units is up the most over the past year (74.6%), although demand for houses has also seen large increases (54.1%).
While weekly demand is trending lower, demand remains higher than seen through much of 2020, particularly when compared with a year ago, when national lockdowns were just ending.
National buyer demand is 57.2% higher than a year ago, with increases recorded in all states and territories.
It is possible demand has declined as more active users on realestate.com.au successfully find and purchase properties, given we have seen higher weekly sales volumes since the market has opened in 2021.
Demand is likely to remain at elevated levels over the coming weeks and months, however, don’t be surprised if an increase in stock and a lift in sales activity causes the index to moderate.
The REA Rental Demand Index
The REA Insights Rental Demand Index rental demand has been falling since the January peak.
According to Cameron Kusher, since the peak in rental demand earlier in the year, the index has fallen -26.4%.
Median property prices
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
Rental market conditions remain diverse, with significant differences between the regions and housing types.
From a geographic perspective, the tightest rental markets are Darwin and Perth, where both house and unit rents are recording double-digit annual growth.
Tim Lawless research director of Corelogic explains…
“Rents are rising at a record-setting pace across both Perth and Darwin, with the quarterly trend up 5.9% and 7.7% respectively.
Rental prices in Perth and Darwin started surging higher in September last year.
The monthly growth in rents across Perth quickly accelerated from an already high 1.1% in September 2020, to 2.0% by March 2021.
Darwin rents have risen by an average 2.1% per month for the past seven months, including a 2.4% lift in March 2021.
Both these markets have seen a recent history of low housing investment which has kept rental supply low at a time of rising demand.
Although rents are surging in these cities, it is off the back of a long period of rental value declines. Perth rents remain -16.0% ($80/week) below the 2013 peak and Darwin rents remain -24.6% ($150/week) below their 2014 peak.”
Weaker rental conditions can be seen in the unit sector, both at a macro level and across the sub-regions of each city.
Overall, unit rents have been showing weaker conditions relative to houses throughout the COVID period to-date.
Since March last year, capital city house rents are up 5.2% while unit rents are down -3.8%.
The biggest drag on unit rents are Melbourne and Sydney, where unit rental conditions have been much weaker due to the demand shock caused by stalled overseas migration and international border closures.”
Sydney unit rents have posted a subtle rise over the past three months, while unit rents in Melbourne have held firm over the same period.
With housing values rising faster than rents, gross rental yields have been trending lower.
Most regions are still showing a gross yield higher than typical mortgage rates, implying some opportunity for positive cash flow investments.
Sydney and Melbourne stand out as having a much lower yield profile.
Both cities have seen gross yields fall to new record lows in March, with Sydney recording a gross yield of 2.7% and Melbourne dropping below the 3% mark for the first time on record.
Auction clearance rates
Auction volumes rose across the combined capital cities this week with 2,170 homes taken to auction, increasing on the 845 auctions held over the Easter week.
The higher volumes saw an improvement in the preliminary auction clearance rate with 79.9% of homes selling, upon the 79.4% preliminary figure last week, which revised down to 77.1% at final collection on Wednesday.
Over the same week last year, it was not only Easter that dampened auction activity, but also the imposition of social distancing measures which included the banning of on-site auctions.
Under these conditions, a lower 634 auctions were scheduled and only 30.6% cleared with 56% withdrawn.
In Melbourne, 1,035 auctions were held across the city this week returning a preliminary auction clearance rate of 77.2%.
The week prior saw a lower 211 auctions held and a final auction clearance rate of 73.5% and one year ago 88 auctions were held and 20% sold. Sydney recorded a preliminary auction clearance rate of 82.8% this week as volumes rose.
There were 814 auctions held across the city, upon the Easter week’s 404 auctions held when an 82% success rate was achieved according to final figures.
One year ago, 413 auctions were held and a 32.1% clearance rate was recorded.
Adelaide, Brisbane, and Canberra all recorded preliminary auction clearance rates above 80% this week, Canberra was the better performer with a 9 0.1% preliminary result.
In Perth and Tasmania, 50% or less auctions were successful over the week.
Now is the time to take advantage of the opportunities the current property markets are offering.
Sure the markets are moving forward, but not all properties are going to increase in value at the same rate. And some sectors of the market will continue to languish.
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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Source of graphs and data: CoreLogic, NAB and REA
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