Residential property market momentum has continued to surge through late March.
With the month not quite over, prices across the five capital cities have already eclipsed last month’s 2.1% gain, rising 2.6% so far this month.
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 auction clearance rates 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 week but, as always, results vary around Australia.
Sydney property prices rose 0.8% in the last week alone – up 3.6% 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 0.6% last week, up 3.5% 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 is beginning to dry up.
At the time of increased demand, buyers are experiencing a lack of good properties available for sale which is driving FOMO (fear of missing out).
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 14 March, 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 March 29th provided by NAB, Corelogic, and realestate.com.au.
What’s happening in our property markets?
The REA Buyers Index
The REA Insights Buyer Demand continues to trend lower despite a record-high year-on-year increase.
According to Cameron Kusher, the fall in demand over the week was uniform, with falls recorded in every state and territory.
Perhaps a little surprising is the fact that since demand peaked earlier this year, demand for houses has recorded a larger overall fall (-7.3%) than demand for units (-5.2%).
While weekly demand is trending lower, the year-on-year increase has never been higher due to the COVID-19 lockdowns that were happening this time last year.
National buyer demand is 72.8% higher than a year ago, with increases recorded in all states/territories except for Australian Capital Territory.
It’s possible we’re seeing demand decline because the most active users on realestate.com.au have now purchased, particularly given we are seeing high weekly sales volumes.
I still expect demand 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 falls for the seventh consecutive week.
According to Cameron Kusher, rental demand hit peak in mid-January this year and has since fallen by -19.5% since then.
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
There were 3,791 homes taken to auction across the combined capital cities this week, the busiest auction week since the week ending 25th March 2018 when 3,990 capital city homes were taken to auction.
In comparison, last week saw 2,710 auctions held across the combined capitals, while at the same time last year, 3,289 homes were taken to auction.
The higher volumes saw the preliminary clearance rate strengthen, with 84.4 per cent of auctions recording a successful result, up from last week’s preliminary clearance rate of 82.0 per cent, which revised down to 80.9 per cent at final figures.
Over the same week last year, a final clearance rate of just 37.3 per cent was recorded across the combined capitals as withdrawal rates surged amidst COVID-related restrictions.
This week last year, 50.2 per cent of auctions were reported as withdrawn, while just 4.1 per cent of auctions have been reported as withdrawn so far this week.
There were 1,899 auctions held in Melbourne over the week, and of the 1,663 results reported so far, 83.8 per cent have been successful.
Last week saw 1,322 homes taken to auction across the city, returning a final clearance rate of 78.8 per cent.
This time last year, 1,565 auctions were held across the city.
Sydney was host to 1,392 auctions this week, increasing from 1,025 over the previous week, and 1,279 this time last year.
The preliminary clearance rate came in at 89.1 per cent this week, increasing on the previous week’s preliminary clearance rate of 87.5 per cent, which revised down to85.0 per cent at final figures.
Sydney’s final auction clearance rate continues to maintain strength, holding above 80 per cent for the past 7 weeks and onceagain this week is likely to be no different once final results are collected.
Across the smaller auction markets, Canberra recorded the highest preliminary clearance rate at 86.3 per cent, followed by Adelaide at 73.9 per cent.
Auction volumes are set to fall next week due to the Easter long weekend, with CoreLogic currently tracking around 880 auctions across the combined capital cities, while the Easter period last year saw 634 homes taken to auction.
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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