It’s been a tumultuous couple of months for our economy and our property markets.
With things changing on an almost daily basis the traditional end of month property data is often out of date before it is reported.
The housing recovery in place since mid-2019 looks set to end amid sharp declines in incomes related to the COVID-19 pandemic and associated shutdown measures.
The climate of uncertainty at a time of deterioration in household income will be the biggest driver of weakness. 
Already, nearly a third of Australian households have reported a deterioration in their finances due to COVID-19.
This collapse in income will create significant uncertainty for households and leave many unwilling to commit to buying or building a home.
Even though we are starting to see some impact from the COVID-19 on housing markets due to a drop in consumer confidence and weaker economic conditions, so far this is reflected more on turnover (the number of properties sold) more than the value of properties.
However the rental market is already showing signs of stress.
While the deferral of home loan repayments will help prevent forced sales, the collapse in demand in the face of the extremely uncertain outlook will slow down our markets.
To help keep you up-to-date, I have changed the structure of this regular monthly update and will not only include my commentary on the end of month data and charts provided by Corelogic, but I will supplement it with some interim data.
The following chart shows the state of our property markets at the beginning of the month.
But what’s ahead now that COVID-19 is crippling the markets?
Let’s start with the number of new residential listings being advertised for sale or rent in the past 7 days.
‘New’ listings means the count is of listing events that have not so far been seen in the current calendar year.
This measure provides insight regarding the volume of new properties coming on to the market.
An increase in new listings suggests an increasing supply of stock available, and higher seller or lessor activity.
A fall in new listings suggests less stock available, and less seller or lessor activity.
Understanding this measure alongside other CoreLogic data such as number of sales, time on market and vendor discounting rates provides further insight on the balance between property market supply and demand.
Now here is a chart of the total number of properties for sale around our capital cities:
The number of property transactions
While the real estate markets have not shut down, we have seen a very significant slow down in transaction numbers.
We are currently seeing around as many properties transactions in the month as were previously sold in around a week.
In the most recent 4 week period:
- Just 862 houses and 453 apartments or units were sold in Melbourne.
- In Sydney only 760 houses and 378 apartments were sold.
- In Brisbane only 375 houses and 96 apartments were sold.
NOW READ: Is now a good time to buy property?
Sydney Property Market
Prior to COVID-19 the Sydney property market was on the move having recorded its quickest turnaround in decades.
Since bottoming out after the election in May, Sydney dwelling values have recovered and are up 14.3% over the past year.
- Sydney house values increased by 0.3% last month (+15.8% over the last year)
- Sydney unit values increased 0.6% last month (+11.0% over the last year.)
The recovery Sydney was experiencing was most concentrated across the premium end of the housing market where values were previously falling more rapidly.
At the other end of the market, investors and home buyers had already abandoned the off the plan apartment sector for many reasons including concerns about construction standards,.
And many of those who purchased off the plan a few years ago are now going to have trouble settling with valuations coming in on completion at well below contract price at a time when banks are more reluctant to lend on these properties. 
Policies restricting open homes and on-site auctions have recently been lifted, which could see activity across the local market pick up, however, some downside risk remains due to Sydney’s exposure to overseas migration as a source of housing demand as well as the likelihood that consumer confidence will remain at low levels.
Rental markets are likely to see weaker conditions due to the reduction in migration rates and less student demand, as well as a short term rental stock transitioning into the permanent rental pool.
Sydney rents were down 0.7% over the month, dragging the gross rental yield to a new record low of 2.9%.
While A grade homes and investment grade properties are likely to fall a little (5- 10%) moving forward, this is a great time for cashed up investors and homebuyers planning to upgrade to buy a property considerably cheaper than they would have had to pay a few months ago, and for considerably less than they will have to pay this time next year.
B grade (secondary) dwellings may fall in value by 10-15% and C grade properties are likely not to sell at all.
Sure there are fewer good properties for sale at the moment, and almost all the good ones are for sale off market, however if you’d like to know a bit more about how to find these investment gems give the Metropole Sydney team a call on 1300 METROPOLE or click here and leave your details.
Melbourne Property Market
Before Coronavirus hit our markets, Melbourne property prices were surging with dwelling values up 12% higher to reach new highs.
- Melbourne house values dropped -0.3% last month (+12.4% over the last year.)
- Melbourne unit values increased 0.1% last month (+11.5% over the last year.)
The monthly fall comes after a strong rebound in housing values since June last year which saw Melbourne dwelling values reach a new record high in February.
Melbourne has relatively high exposure to overseas migration which is likely to be one of the factors behind Melbourne’s weakness, along with the policies restricting on-site auctions and open homes.
Melbourne rental rates were also down over the month, falling by half a percent.
Rental markets are likely to experience weaker conditions relative to home values due to higher supply of rental properties, and less demand.
Like in Sydney, A grade homes and investment grade properties in Melbourne are likely to fall a little (5- 10%) moving forward.
B grade (secondary) dwellings may fall in value by 10-15% and C grade properties are likely not to sell at all.
At Metropole we’re finding that strategic investors with a long-term view and homebuyers looking to upgrade are still in the market, picking the eyes out of the off market properties.
It’s likely that they see the long-term fundamentals as Melbourne rates as one of the 10 fastest growing large cities in the developed world,.
Melbourne’s population was forecast to increase by around 10% in the next 4 years.
Clearly this will slow down now, with restricted borders protecting Australia, but once we “cross the bridge” Melbourne will remain one of the most liveable cities in the world.
If you’d like to know a bit more about how to find investment grade properties in Melbourne please give the Metropole Melbourne team a call on 1300 METROPOLE or click here and leave your details.
Brisbane Property Market
Understandably, the coronavirus crisis is creating uncertainty for those interested in the Brisbane property market, however Brisbane home values continued to edge higher in April, up 0.3% over the month.
Looking back over the last few years Brisbane’s property downturn in 2018-9 was quite shallow compared to the big two capital cities and following its recent upturn property values growth has slowed.
However, Brisbane property prices are still about 55% of Sydney’s while household incomes are only around 12% lower, underpinning the value of Brisbane real estate.
- Brisbane house values increase 0.3% last month (+4.2% over the last year.)
- Brisbane unit values increased 0.5% last month (+2.3% over the last year.)
- Rental markets have started to see some weakness though, with rents down 0.4% in April, reflecting a rise in rental supply as well as a reduction in demand.
But what’s going to happen to the Brisbane housing market moving forward?
With less reliance to overseas migration as a source of housing demand and the largest number of interstate migrants, the Queensland market may be less exposed to downwards pressure in housing values.
Of course Queensland is highly exposed to the Chinese economy, in particular tourism, education and foreign property purchases.
On the flipside, once travel bans are lifted, the Queensland economy and property market should benefit from more local travel by Australians as it is likely that overseas travel will still be restricted.
Not all Brisbane property will be impacted equally.
Clearly there is not one Queensland property market.
Regional Queensland is likely to suffer more while the Brisbane real estate market is underpinned by multiple pillars, and therefore likely to suffer less than areas like the Gold Coast and Sunshine Coast or regional Queensland.
But even Brisbane does not have ‘one’ property market.
Based on the predicted pace of the post-recession recovery, I would expect the pandemic to have a more limited and shorter-lived impact on house prices than either the early-1990s recession or the Global Financial Crisis.
Just to make things clear…I have confidence in the long term future of the Sunshine State capital.
Brisbane is one of the world’s great cities.
Liveability, affordability, scale and future economic prospects all suggest that Brisbane is a market where you can confidently buy.
While it’s true that once we come through the Coronavirus pandemic Brisbane is likely to be the one of the best performing property market over the next few years, there is not one Brisbane property market.
While some locations in Brisbane have strong growth potential, and the right properties in these locations will make great long term investments, certain submarkets should be avoided like the plague.
In the long term Brisbane’s economy is being underpinned by major projects like Queen’s Wharf, HS Wharf, TradeCoast, Cross River Rail, the second airport runway and the Adani Coal Mine, but jobs growth from these won’t really kick off for a few more years.
Our Metropole Brisbane team has noticed a continued enquiry with many more homebuyers and investors showing interest in property.
At the same time, we are getting more enquiries from interstate investors there we have for many, many years.
If you’d like to know a bit more about how to find investment grade properties in Brisbane please give the Metropole Brisbane team a call on 1300 METROPOLE or click here and leave your details.
Now read: Brisbane property market – how will Coronavirus affect it?
Adelaide Property Market
Adelaide was one of the few capital city markets where the pace of capital gains in April was higher than six-month average.
The rise in values was broadly based, with each of Adelaide’s sub-regions recording a rise in home values over the month, led by Adelaide West where values were nine-tenths of a percent higher in April.
New listing numbers were down 38% compared with a year ago, reflecting a substantial drop in advertised supply levels, and rental markets softened, with rents slipping 0.1% in April.
- Adelaide house values increased 0.4% last month (+1.3% over the last year.)
- Adelaide unit values increased 0.7% last month (+2.5% over the last year.)
However, Adelaide will not be immune to the coronavirus led recession, particularly as it does not have multiple pillars supporting it economy.
Perth Property Market
It looked like the Perth market was finally starting to pick up.
Yet despite renewed growth, the median house value across Perth remains the lowest of any capital city.
Perth home values have avoided a fall for six consecutive months which is the longest run of growth since the market peaked in mid-2014.
The April figures showed a 0.2% lift in values over the month taking the market 1.1% higher over the year to date.
- Perth house values increased 0.3% last month (-2.5% over the last year.)
- Perth unit values fell -0.2% last month (-3.0% over the last year.)
Local rents also edged higher, rising 0.1% in April with Perth the only capital city to avoid a drop in rents over the month.
Despite the positive monthly reading for values and rents, it’s clear that activity has reduced.
New listing numbers are down about 46% compared with a year ago and our estimate of buyer numbers has more than halved over the month, suggesting buyers and sellers have retreated to the sidelines.
Hobart Property Market
Hobart was the darling of speculative property investors and the best performing property market in 2017- 8, and while dwelling values reached a record high in February 2020, its boom is now over and values have fallen slightly.
It’s likely the Hobart market will continue to lose its momentum over the year as its local economy is very dependant on tourism which is a sector of the economy that will suffer more than most.
- Hobart house values fell -0.2% last month (+6.1% over the last year.)
- Hobart unit values increased 0.5% last month (+1.0% over the last year.)
Darwin Property Market
The Darwin property market peaked in may 2014 and is still suffering from the effects of the end of our mining boom with a very soft employment market and lack of migration and infrastructure spending.
Finally Darwin property values started to increase over the last few months, but the upward trend is unlikely to continue now.
Currently values are 30% below their historic peak and it is unlikely we’ll see these types of house prices again in the next decade.
- Darwin house values increased 1.1% last month (-3.8% over the last year.)
- Darwin unit values increased 3.1% last month (-0.3% over the last year.)
The small size of the Darwin market makes it more susceptible to local events and Darwin typically has a higher and more variable vacancy rate, a product of a large transient working population.
Darwin does not have significant growth drivers on the horizon and would be best avoided by investors.
Canberra Property Market
Canberra’s property market has been a “quiet achiever” with dwelling values having reached a new peak after growing 4.7% over the last year .
Considering a large percentage of Canberra population is employed by the government or industries supporting the public sector, Canberra’s property market is less likely to be affected by the upcoming recession than our other capital cities.
- Canberra house values increased 0.1% last month (+5.3% over the last year.)
- Hobart unit values fell -0.4% last month (+0.9% over the last year.)
Our rental markets
Following a number of years of sluggish rental growth, rents had been rising earlier this year and the team at Metropole Property Management were getting a record number of rental enquires.
While leasing enquiries are still there and inspections of properties can still occur, vacancy rates have risen, particularly in and around the Sydney and Melbourne CBD’s and this is causing rent to fall.
Other market indicators:
Vendor metrics had generally improved over recent months with the number of days to sell a property decreasing (a sign of the tight supply situation), vendor discounting decreasing (it’s easier for them to sell) and auction clearance rates started the year on a very strong note.
But now, discretionary buyers and sellers are out of the market and the number of new properties listed for sale has falling significantly and likely to continue to for the next few months until we are out of lockdown.
The RBA dropped “official interest rates twice in March and banks have been lowering their rates to new borrowers in order to “buy” business.
Read more (and watch the video): How will COVID-19 impact on your banking and loans?
And first homebuyers were back into the market early this year, some taking advantage of government incentives while others experienced FOMO, watching property values increase faster than they could say for the deposit.
Interestingly, investor activity start the year off slowly and has continued that way.
What’s ahead?
It’s hard to make predictions. Especially about the future.
It’s even harder to predict the end point of a moving target.
Yet, as someone who’s meant to know a bit about our property markets, I’m regularly asked how all this is going to play out?
What’s going to happen to the property markets? Are house prices really going to crash like those doomsayers keep telling us?
Of course, I realise there are some commentators out there making predictions; but my answer is – I really don’t know!
I realise that’s not a satisfactory answer.
By the way…no one else really knows the answers either!
Yet at a time like this, most of us are looking for someone to tell them what’s going to happen next.
Of course I wish I had the answers. I really do.
All I can say is I don’t know.
I don’t know how this virus is going to play out, how long we’ll be in lockdown or what the economic fallout will be.
But there are a few things I do know and I suggest you read this blog to understand what’s ahead: Coronavirus crisis: I have no idea what will happen to property prices!
What I do know is that once we cross the proverbial bridge that the government is building for us, a property market will rebound again as they always have.
I also know that there’s a group of strategic investors and business owners who are positioning themselves for the future.
They recognise that there is currently a strategic window, the time between now and that survival to get set to take advantage of the opportunities that always abound after severe downturns.
As property investors they are working with their consultants to set up a strategic property plan, they getting their financial and ownership structures in place and doing the appropriate research.
They’re not trying to time the market, but they want to take advantage of the opportunities the market is currently and will in the future be offering.
These strategic investors know that people will eventually come out of lockdown and want to get on with their lives.
These strategically focused investors know it looks bad today, it might even look bad tomorrow, but they’re prepared to hang in there, they’re prepared to lay the foundations for their future success.
Despite the headlines, they know that the world will not going to end. They are prepared to bet on humanity.
They recognise that how they think and what they do between now and that survival line will determine their level of success when we move on to whatever our new normal will be.
NOW READ: Is now a good time to buy property?
In my opinion for those who have a secure job and their finances organised, this is a great time to buy a home or investment property at a price that you were unlikely to be able to get a couple of weeks ago when the property markets in big capital cities were booming and there were more buyers around than sellers.
It is likely that human nature will cause many would-be buyers to sit on the sidelines for a little while until things become more clear, which means that sellers will be more amenable to accepting offers rather than holding out for a top price.
Remember don’t make long-term decisions like buying a home or an investment property based on the last 30 minutes of news.
There is no doubt there will be opportunities in the market for those who are willing to go against the crowd and when they look back in a year’s time and definitely in 5 or 10 years’ time, they will remember the unprecedented events of 2020 as a great buying opportunity for property.
Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on
If you’re wondering what will happen to property in 2020–2021 you are not alone.
You can trust the team at Metropole to provide you with direction, guidance and results.
In challenging times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s what you exactly what you get from the multi award winning team at Metropole.
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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.
Please click here to organise a time for a chat.
Or call us on 1300 METROPOLE.
Source of graphs and data: CoreLogic.
from Property UpdateProperty Update https://propertyupdate.com.au/australian-property-market/
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