It`s great that, as a nation, we`ve flattened the virus curve back to virtually nothing over the past month and subsequently many of the social distancing policies that have impacted on housing markets and economic activity have either been relaxed or lifted.
Some states have opened up their borders, and, in most areas, the number of home sales has shown a substantial improvement relative to the sharp fall in April.
The downwards pressure on home values became more broad-based in May.
The national home value index was down by 0.4% over the month, with five of the eight capital city regions recording a fall in values.
With restrictive policies being progressively lifted or relaxed, and economic conditions showing some early signs of improving, the downwards trajectory of housing values could be milder than we first expected.
Across the state capitals, Melbourne`s housing market has posted the largest falls over the month, down by 0.9% in May, following a 0.3% reduction in April.
Values were also down over the month in Perth, in Sydney, Brisbane and Darwin, but they rose in Adelaide, Hobart and Canberra.
Regional markets have been more resilient to value falls, with the combined regionals index holding firm through May.
Although housing values are currently slipping or stabilizing, recent history implies that most homeowners have some level of a buffer that will help to protect against negative equity.
National home values remain 8.3% higher than they were a year ago, with Perth and Darwin the only capital cities where values remain lower than at the same time last year.
The high annual capital gains are mostly attributable to the earlier growth trajectory of housing values across Sydney and Melbourne, with the remaining capitals showing a more sustainable history of price rises.
Despite the loss of momentum of housing value growth, buyer numbers have shown a solid rise in May.
After housing market activity fell by around one third in April relative to March, sales activity bounced back by an estimated 18.5% in May.
Housing market activity remains well below average, however, the rise in sales through MAy coincides with a consistent rise in consumer sentiment and eased social distancing policies through the month.
With consumers feeling more confident, households are better equipped to make high commitment decisions such as buying or selling a home.
A lift in housing market activity should also support broader economic activity, with housing turnover providing a positive flow-on-effect to other sectors including the retail sector, construction, and banking.
Improved confidence is also flowing through to a rise in new listing numbers.
The number of fresh property advertisements bottomed out at a historic low in early May, with the rolling 28 days count up 22% compared with the end of April.
Although new listings numbers are trending higher, the total listing count, which includes new listings as well as re-listed properties, has continued to trend down, implying a healthy rate of absorption as buyers become more active.
The relationship between new listing numbers and total listings will be a key trend to watch; if total stock levels become elevated, this indicates that supply is outweighing demand.
Currently, this doesn`t look to be the case.
Auction market indicators provide another confirmation point of improving conditions.
The combined capital city clearance rate bounced back from a low of about 30% in April, to nearly 63% in the week ending 24th of May.
As policies preventing open homes and on-site auctions eased during May, there was a clear improvement across auction markets.
We`ve seen a sharp reduction in the number of auctions being withdrawn, and more vendors are testing the market under auction conditions rather than accepting an offer prior to the auction.
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