Many in media have highlighted any forecasts of a major collapse in property prices and generally have ignored the more mainstream commentators who have suggested only moderate impact on house prices as a result of the pandemic.
And now we’re gradually seeing media acknowledging that the most dire predictions about prices just haven’t come to pass.
Anthony Keane, personal finance writer for the News Corp Australia Network writes this week: “Fears of a huge house price fall haven’t eventuated in Australia …
“The recent second wave of coronavirus that’s crashed mainly on Victoria has given more ammunition to those with a negative view, but it’s pointless to panic too much about property prices right now.
“The latest CoreLogic data shows four capital city’s home values were higher or steady between March and July – Canberra up 1.3 per cent, Hobart up 0.8 per cent, Adelaide up 0.7 per cent and Darwin flat.
“In that same period Brisbane values dropped just 0.6 per cent, Sydney fell 1.7 per cent and Perth decreased 2 per cent …”
He points out that, not surprisingly, the worst city result is “virus-plagued Melbourne” where the median price has dropped 3.5% in the past five months.
And he says: “The scary 30 per cent dives forecast by some appear far-fetched.”
Yes, indeed, that was never going to happen.
The latest figures on prices, out today from SQM Research, show that house prices remain higher than they were a year ago in seven of the eight capital cities. The only exception is Darwin.
In the past month, are largely unchanged in Melbourne, Brisbane, Adelaide, Darwin and Hobart.
They actually rose in Melbourne in the past month but the rise was only 0.1 per cent, which I regard as effectively no change.
According to the SQM figures, Sydney is the only capital city to record a substantial decline in its house prices in the past month – but they nevertheless remain 6.5% higher than a year ago.
The Reserve Bank of Australia has indicated that it might keep the official interest rate at a historical low for the next three years.
The central bank reduced the official cash rate at its meeting on March 3 as the pandemic started to grip the nation. It then held an extraordinary meeting just two weeks later when the board decided on a package that included a further reduction to 0.25 per cent.
Governor Philip Lowe has told the House of Representatives Standing Committee on Economics that the cash rate looks set to remain at that level for some time.
“The board has clearly indicated that it will not increase the cash rate until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2-3 per cent target range,” Lowe said.
“These conditions are not likely to be met for at least three years.”
And against that background, lenders are competing strongly for the business of borrowers and offering interest rates that start with a 2 – and, in one or two cases, interest rates below 2% for owner-occupier borrowers.
Although it’s important to note that, as mortgage broker Louise Lucas noted during the webinar I hosted last week, lenders have further tightened their criteria and are making it more difficult for property buyers to get approvals for the loans they need.
RateMyAgent’s half-yearly Price Expectation Report (January-June 2020) asked 33,000 successful vendors if the sale price achieved was above, below or in line with their expectations.
Results showed an increase in satisfaction year-on-year, with overall net happiness up 12 per cent from June 2019 (27 per cent) to June 2020 (39 per cent).
During the first half of the year, vendor price satisfaction slumped 4 per cent in March, which was followed by a sharp drop of 8 per cent in April, with only 35 per cent of Australian sellers reporting an above-expectation sale price during the month.
However, when compared to the same period year-on-year (April 2019), April 2020 still reported an 8 per cent increase.
According to RateMyAgent CEO Mark Armstrong: “April was a particularly tough month for vendors. There wasn’t a single state in Australia that didn’t experience a decline in sale price happiness. This is reflective of the high levels of economic and consumer uncertainty around the business impact and government restrictions associated with managing the pandemic.”
From late-April, the market began to find its feet, with vendor happiness seeing a stabilisation throughout May (35 per cent) and into June (36 per cent).
This stabilisation can be attributed to an unprecedented drop in property supply in April – suddenly, buyers were having to compete for a reduced number of properties on the market, which kept prices stable and naturally vendor sale price satisfaction improved slightly.
“As expected, what we’ve seen since May is the stabilisation of market confidence – after the initial shock in March and April wore off, consumer optimism is on the way back up as seen in our recent Price Expectation Report,” Armstrong says.
“The return of consumer confidence is largely attributed to the Australian Government’s stimulus packages. HomeBuilder, JobKeeper and JobSeeker have provided a safety net to Australians and added a level of security to what would be an otherwise quite volatile economic period.”
Improvements were led by strong satisfaction levels in the ACT, where net vendor happiness jumped from 44 per cent in April to 57 per cent in June.
We’re seeing increasing acknowledgment of the strength of markets in regional Australia.
According to the latest report from valuation firm Herron Todd White, many regional property markets remain resilient due to low/nil infection numbers – and I would add that they have economies which are well set up to prosper in the pandemic period.
This month HTW’s residential teams around Australia have revealed the state of affairs for investor purchasers in their speciality locations.
For example, they say that in Byron Bay property sales have kicked upward over the last month as intrastate and interstate travel brought non-local buyers back into play.
They say investors in the New England North West are active in the major centres of Tamworth and Gunnedah, with properties in the $200,000 to $400,000 selling at or near their listing price.
In the north of the Gold Coast, the market is currently strong, and properties marketed with sensible expectations are selling very quickly.
In Rockhampton, they continue to see residential properties selling. Well-presented properties continue to be snapped up by purchasers in Rockhampton and the Capricorn Coast
Of Townsville HTW says: “The resilience of the Townsville residential market post-COVID-19 continues to astound us with increasing sentiment and a noticeable increase in vacant land sales and new home construction thanks to the $25,000 Homebuilder grant.”
It also expresses positive sentiment in various other markets around the nation, including Warrnambool in Victoria, Alice Springs in the Northern Territory and Hobart in Tasmania.
This general theme of solid to strong markets in regional areas is also reflected in the recent report on vacancies from SQM Research.
It says residential vacancies in outer suburbs and regional areas fell sharply in July.
One example was the sharp reduction in rental vacancies in Mornington Peninsula, in contrast to the trend in inner Melbourne.
The latest vacancy report from the REIQ shows that North Queensland vacancy rates have continued to fall, with some towns experiencing their tightest rental markets on record.
Townsville recorded its lowest ever vacancy rate during the June quarter, falling to just 1.7 per cent.
The Burdekin region, which had an unenviable vacancy rate above 10 per cent in 2015 and 2016, has seen its stock of available rental properties shrink to just 1.1 per cent in the June quarter.
Charters Towers saw one of the biggest drops in vacancy rates, falling from 5 per cent in March to just 1.5 per cent in the June quarter.
The Mount Isa market has also tightened, dropping from 2.5 per cent to just 0.5 per cent.
It’s also very tight in the rental market in Mackay with a 1.3 per cent vacancy rate in the June quarter.
The Isaac region, which includes a number of mining towns, also has a 1.2 per cent vacancy rate.
REIQ CEO Antonia Mercorella says the latest figures show the state is facing the tightest rental conditions since the Global Financial Crisis.
A separate report on the Sunshine Coast says:
“Would-be tenants are being turned away across the Sunshine Coast as agents struggle with the lowest rental property vacancy rates the region has seen in years.
LJ Hooker Twin Waters property manager Nicole Wilson said for the first time in years, the area had a zero per cent rental property vacancy rate. “We’ve got loads of people, qualified tenants, looking to move to the area, but we’ve just got nothing to give them.”
New home sales have risen by almost two thirds on the back of the Federal Government’s HomeBuilder stimulus package, according to Housing Industry Association analysis.
The onset of the pandemic in March saw new home sales fall. But in the two months following the June announcement of the $670 million grants package, sales numbers have bounced 64% compared to the two months prior.
Chief Economist at the HIA, Tim Reardon, says the $25,000 grant to eligible new residential homes, together with the improving health conditions and easing of restrictions across most jurisdictions, caused confidence in the market to improve. “Housing data has been ricocheting through the COVID-19 period,” Reardon says.
Another report, from Oliver Hume, says that land sales in south-east Queensland surged 400 per cent in June, its strongest monthly result in five years, as home buyers rushed to take advantage of the HomeBuilder scheme. A total of 1,110 lots were sold during the month – up from just 273 sales in April.
Oliver Hume national head of research George Bougias says the HomeBuilder grant and record-low interest rates are driving demand. “Despite the shutdowns and their economic impact, there are still plenty of buyers with stable incomes who are more than happy to take advantage of the numerous grants incentives available,” he says. “With restrictions lifted and the great incentives in place, pent-up demand is returning.”
Here’s an emerging trend in real estate:
The number of home buyers in Victoria and NSW searching for a “home office” as part of their next property purchase has risen for the second time since the coronavirus pandemic began.
Prospective buyers are also continuing to look for extras like a home studio, retreat or a garden or courtyard for extra space, the keyword search data showed.
Domain senior research analyst Nicola Powell says the surge in searches in Victoria is much more pronounced than those in NSW, as Victoria and its capital Melbourne has faced multiple lockdowns over the year.
Victoria’s surge in searches for a “home office” – up 1107 per cent between June and July – coincided with its stage three and four lockdowns as people worked from home.
By comparison, NSW home office searches rose 17 per cent. The largest increase between in searches between June and July was for “retreat”, up 78 per cent.
Powell says the pandemic is changing the language searchers are using in property, with a bigger surge in “home office” than “study”.
For me, this is a symptom of one of the major trends in real estate at the moment, which is what I call the Exodus to Affordable Lifestyle. More people can work remotely and no longer need to be in the big, congested, expensive capital city and are moving to the fringes or to regional areas.
And this has been enhanced by the lockdown periods, forcing more people to work from home. Hence more people prioritising “home office” when looking for homes with the key qualities that they want.