The stubborn resistance of house prices to the negative forces on the pandemic is shown by the month by month data from CoreLogic – with the latest figures published yesterday.
An analysis of the monthly figures for the past five months covering the pandemic period shows that – generally speaking – there has been a gradual deterioration in price outcomes.
That’s the national average situation, dragged down by the fact that the two biggest cities have prices falling. But there are many locations across Australia where prices are still rising, despite everything.
Looking at the average national result, house prices were …
- up 0.7% in March,
- up by a smaller amount in April,
- down marginally in May,
- down by a larger amount in June
- and then a similar, though slightly better, result in July.
That’s the national average situation.
But looking at the figures at a more local level, shows that some locations have been more resilient than others.
The latest figures show that half the market jurisdictions managed to produce some level of growth in their house prices during July.
The “jurisdictions” I refer to are the eight capital cities and the seven state or territory regional markets.
Of those 15 jurisdictions, seven produced some level of growth in house prices in July. Remarkable in the circumstances.
Those figures illustrate a point I have been making regularly in recent months: that regional markets are generally doing better than capital city markets.
In July, five of the seven regional jurisdictions produced house price growth, compared to two of the eight capital city markets.
The figures from the past five months deliver other important messages. One is that month-to-month figures can be highly erratic – and so we need to be careful about placing too much significance on one month’s results.
In Darwin, for example, house prices rose in April, fell in May, rose in June and fell in July (according to the CoreLogic data – other sources have different figures).
In Hobart, house prices rose in March, fell in April, rose in May and June, then fell in July. Again, if you believe the CoreLogic figures.
Another message in the data is that we don’t have a single market in Australia. We have many different markets with different outcomes from one market to the next.
That’s an important point because media is reporting that Australian property prices fell in July, when in reality there were price rises in Canberra, Adelaide and five of the seven regional jurisdictions. And although prices overall fell in Sydney and Melbourne, there are locations within those big cities where prices continue to rise.
Looking at the longer-term patterns, some markets stand out for their consistency and strong resistance to the national economic forces.
Canberra has delivered some level of growth in each of the past five months. This tends to confirm our view that the national capital is the most Covid-proof city in the nation.
Adelaide has also shown great consistency, with small rises in four of the past five months, including in July. This confirms my positive opinion about the solidity of this under-rated city.
Two of the regional markets, South Australia and Tasmania, have delivered price growth in all of the past five months.
And two others – NSW and Queensland – have achieved growth in four of the past five months, including during July.
Central message: prices have not collapsed anywhere and some places continue to grow.
It’s a different message to one delivered by mainstream media. One major newspaper has reacted to the latest figures with the claim that they show that house prices are “plunging” right across Australia. But nothing of the sort is happening.
The CoreLogic figures indicate that house prices are higher than they were a year ago in 11 of the 15 market jurisdictions.
That simple truth demonstrates that the forecasts back in March-April of a dramatic and immediate collapse of house prices were sensationalist nonsense.
Referring to some of those predictions four or so months ago, there was a Budget Direct survey back in April and, at that time, most Australians predicted property prices would fall over the following three to six months. Of these, the vast majority anticipated an average fall of 20% or less, while around 13% predicted a fall of more than 20%. Only 20% of the people surveyed figured prices would rise, while some thought there would be no change in property prices.
And those predictions were somewhat in line with the predictions made by major banks and research institutions.
The University of Melbourne forecast a 4.4% decline in the June Quarter (end of March to end of June), followed by another 2.3% drop in the September Quarter. Meanwhile, in May Commbank predicted a coronavirus-led house price drop of up to 30% in a worst-case scenario, while NAB also said in April house prices could drop by a cumulative 30%. ANZ also said prices could drop by up to 13% in Sydney and Melbourne through to mid-2021.
But so far, house prices have remained resilient.
The CoreLogic Home Value Index for June showed that over the June Quarter, national median dwelling values declined by just 0.8%. That’s the national average, again dragged down by Sydney and Melbourne. But four capital cities – Hobart, Adelaide, Darwin and Canberra all recorded dwelling price increases in the June Quarter – and so did most of the regional market jurisdictions.
A survey conducted by comparison website Finder has found that property is considered the best investment option in the current environment, ahead of shares and gold.
Finder’s latest ‘RBA Cash Rate Survey’ found 32% of economists and analysts surveyed said property was the best investment followed by shares at 21%, gold 14%, superannuation 11% and cash 7%. Finder noted also that a “surprisingly high” percentage (42%) of experts believed now was a good time for home-owners to put their property on the market – while a quarter said home-owners should wait a year or two before seeking to sell. The survey also indicated that this was a particularly good time to borrow to buy a home.
Graham Cooke of Finder says: “This environment has pushed interest rates lower than ever. We’ve just seen the first sub-2% loan hit the market, and that could be a sign of things to come.” And he says: “With investors fleeing the market, banks are fighting tooth and nail for owner-occupier customers. It’s the ultimate borrower’s market. If your home loan has a three in front of it, you’re paying too much.”
Now there has been some research published this week by the major website realestate.com.au, showing the locations which have shown the best price growth over the past 20 years.
They did a study of the 100 suburbs with the biggest growth in house prices over the past two decades and found there were multiple areas where the average value of homes increased five-fold.
In Sydney, the most notable rises were in a cluster of suburbs in the city’s south-west and north-west, where major infrastructure projects improved accessibility and drew new buyers. Gentrification, which saw warehouses turned into urban homes, drove another boom in property values in much of the inner west and the inner south, including suburbs like Redfern, Surry Hills and Alexandria. The same trend drove up prices in industrial port cities Wollongong and Newcastle – the latter was home to the suburb with the country’s biggest jump in prices this century: Cameron Park, 19km west of the Newcastle CBD.
In Brisbane there are many suburbs where house prices surged by 400%. The top suburbs in Queensland include 20 Brisbane suburbs – mostly middle ring and coastal areas, and numerous locations on the Sunshine Coast. Windsor, in Brisbane’s inner north, posted the biggest surge in its median house price in the state, increasing from $183,000 in the year 2000 to $1.08 million in June 2020.
Today I’d like to look at how major media has reported the latest price data. At the beginning of the broadcast, I detailed the content of the house price information in the CoreLogic report published on 3 August.
The Financial Review, which in my view is the most dishonest newspaper in the nation, said that Melbourne had led what it called a “a further plunge in capital city property prices in July”. A plunge? A drop of 0.6% is a plunge?
Another report in the Financial Review declared that “the property market is falling as we speak”. I wonder which property market they’re referring to.
Certainly not Adelaide or Canberra or Brisbane or Perth, which all have busy property markets right now, nor any of the major regional centres across the nation, where buyers are competing for the limited supply of properties.
That newspaper, like The Australian, made the error, common among poorly-informed journalists, of seeing Australia as a single property market.
The Australian declared in a headline that “Australian home prices have fallen for the third successive month”. At least they didn’t use sensationalist language like “plunge” or “nosedive” to describe a situation where CoreLogic’s home value index has dropped just 0.7% since March.
Figures released today by SQM Research reveal national residential property listings increased in July by 3.8% from 301,140 listings in June 2020 to 312,680. That suggests that vendors are becoming more confident. All capital cities except Darwin experienced increases in property listings over the month. The largest listings increase was in Sydney at 8.7% followed by Canberra with 6.4%.
Louis Christopher says: “It is somewhat abnormal to record a rise in listings during the winter months. Normally, falls are recorded. This could have been generated by the lifting in restrictions over May and June, enticing sellers to the market.”
In other words, as restrictions have been eased in most parts of the Australia, not including Melbourne obviously, vendors have become more confident about putting their properties on the market.
Also in the SQM Research report published today were the latest figures on residential rentals. The new SQM Research figures show that, nationally, house rentals are up 2.2% in July and around 4% over the past 12 months. In the past month, rents have risen in Perth, Adelaide, Canberra, Hobart and Darwin – and there was essentially no change in Brisbane. That’s because vacancies are low in all these cities.
But you won’t be hearing about that in media in the next few days – you’ll be hearing that rents are falling in Sydney and Melbourne. Which is true – but my question for journalists is: what about the 17 million Australians who don’t live in Sydney and Melbourne? How about some coverage of their situation. Two-thirds of the national population live in places where vacancies are low and rents are rising. And so too, in many locations, are prices.
Despite everything that’s happening in the background.