Despite increasingly onerous lockdowns our pandemic-stricken housing markets just keep rising.
At a time when there are fewer properties for sale than there are buyers out there – homeowners and investors – this creates an environment that will support further house price gains until supply catches up or affordability issues constrain demand. Even though our lockdowns may put a pause on this for a while
Yet despite what is now more than a 7-week lockdown and with at least another month to go, the Sydney real estate market is bounding along, functioning as best as could be expected in the circumstances.
This week, Sydney’s preliminary auction clearance rate was 83%. The Melbourne auction clearance rate was much lower at 63% in part due to the high number of withdrawn sales (treated as passed in.)
- Sydney property prices have kept moving higher, up another 0.4%up 19.7% over the last year.
- Melbourne house prices rose another 0.2% this past week, up 11.8% over the last 12 months
- Brisbane house prices increased 0.4% over the last week and 18.6% over the last year.
Of course, there are headwinds that will slow us down, including concerns about the economic impact that prolonged lockdowns will deliver.
At the same time, the number of properties coming on to the market over the next weeks is likely to keep falling as vendors would not logically plan to list their properties for sale when they can’t get people through their property and the probability of conducting a public auction is low.
It is more likely that vendors will hold off until we get to the other side of lockdowns.
Nevertheless, despite the disruption, property values are holding up well as there are more buyers than good properties for sale and this means property values will keep rising.
The number of properties for sale in Australia is still in short supply
The supply of properties for sale just can’t keep up with demand.
Capital city demand continues at a vigorous rate, with buyers out in force – owner-occupiers, investors, and first home buyers – at a time when available supply struggling to keep up.
For every new property coming onto the market for sale, 1.4 properties are being sold around Australia.
The table below shows how the stock of advertised properties is well below year-ago levels across all capital cities.
At the same time “time on market” continues to decline.
These are signs that property values will continue to rise moving forward.
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 August 16th provided by NAB, Corelogic, and realestate.com.au.
What’s happening in our property markets?
The REA Buyer Demand Index
The REA Insights Buyer Demand Index increased 0.9% last week.
According to Paul Ryan, the level of buyer demand is now within 10% of the historic-peak recorded in mid-February this year.
Demand across the country has been affected by lockdown measures to contain recent COVID-19 outbreaks.
But over the past week, buyer demand increased in all regions except Queensland and Western Australia.
Demand for units has increased the most over the past year, with demand for houses broadly flat. An influx of first-home buyers, as well and investors coming back into the market in 2021, has contributed to the increase in interest for units.
Demand is likely to fall over the coming weeks, with lockdown restrictions looking set to continue in New South Wales.
The outlook for Victoria and Queensland is more uncertain.
As sellers delay bringing new properties to market until conditions normalise, our measurement of buyer demand will fall, as we saw during lockdowns in 2020.
But later in the year, should this wave of the pandemic be brought under control, we expect a rebound in market activity and buyer demand.
The REA Rental Demand Index
The REA Insights Rental Demand Index, increased 1.8% last week.
According to Paul Ryan, lockdowns to contain the most recent COVID-19 outbreaks are driving mixed trends across the country for rental demand.
The end of lockdowns saw rental demand rebound significantly – in Victoria, by 5.7% and South Australia by 13.8%. But in New South Wales, where restrictions continue and Queensland, where new restrictions have been put in place, demand fell slightly.
Aggregate rental demand is a bit below a year ago, when rental demand recovered after national lockdowns and Australians returned from overseas.
While rental demand remains about 20% below the peak recorded in January this year, the level of demand remains 25% higher than the average over 2019, before the pandemic.
This is surprising given that foreign students – traditionally a strong source of rental demand in inner-cities – remain unable to enter the country.
It shows many Australians are still reassessing where they want to live, and what they want to live in, as the pandemic rolls on.
Median property prices
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Vendor Metrics
Vendor metrics confirm that despite the lockdowns, we’re in a seller’s market with the number of days to sell property very low (a sign of the tight supply situation), and vendor discounting (it’s easier for them to sell) at very low levels.
In general, houses are selling better than apartments, but the shortage of good properties on the market is seeing properties selling quickly with minimal discounting.
Our Rental Markets
While rental growth is slowing, we’ve still experienced the highest rental growth in over a decade.
Growth in rental rates eased over the second quarter of 2021, with the national rental index rising by 2.1% over the 3 months to June compared to a 3.2% rise over the March quarter.
While rental growth has slowed over the recent months and quarters, the latest figures take national rental rates 6.6% higher over the year; the highest annual growth in dwelling rents since January 2009.
Regional rents continued to outpace capital city rents over the second quarter of 2021, with regional dwelling rents rising by 2.7% against a 1.9% rise in capital city rents.
This was a 1.4 percentage point reduction in the rate of growth quarter on quarter for the combined regionals, and a 1 percentage point reduction for the combined capital cities.
Despite the easing in growth in recent months, regional Australia recorded an annual rate of rental growth of 11.3% in June 2021.
Last weekend’s auction clearance rates
This weekend’s auction results were a tale of two cities.
The Sydney auction market held up well despite being in lockdown for seven weeks, with very little stock available to satisfy the strong demand for good properties.
However, Melbourne auction clearance rates were lower as the Covid restrictions began to bite.
Dr. Andrew Wilson of My Housing Market was tracking 1,872 auctions in the major capitals this weekend, less than last weekend’s 2,104 properties auctioned.
As lockdowns and difficulty inspecting properties persist we can expect the number of properties going to auction to be lower moving forward.
Adelaide was the stand-out performer with a preliminary auction clearance rate of 94.3% from the 85 auctions conducted.
Other preliminary clearance rates (as reported by Dr. Andrew Wilson’s Auction Insider) were:-
- Sydney – 83.0%
- Melbourne – 66%
- Brisbane – 64.9%
- Canberra – 83%
Source of graphs and data: CoreLogic, NAB and REA, and Dr. Andrew Wilson – My Housing Market 16th of August 2021.
from Property UpdateProperty Update https://propertyupdate.com.au/australian-property-market/
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