John McGrath - More Homes For Sale But Demand Swamping Supply
A lack of stock for sale has been a key factor in rising property prices since late 2020, however new data indicates that more sellers are finally coming to market, which will eventually make things easier for buyers.
Demand has skyrocketed across Australia due to rock bottom mortgage rates and our exceptional management of the pandemic, which has resulted in a world-leading economic recovery now underway.
Initially, rising demand but no real change in stock levels led to very concentrated competition that pushed prices higher. In 2021, FOMO has certainly set in and exacerbated price growth to the point where buyers are having to increase their budgets on a month-to-month basis to keep up.
Meantime, as is typical in the early stages of a market turnaround, sellers haven’t responded as quickly as buyers and that’s why stock has remained low to date. Owners have been watching the market, waiting to see a period of sustained price growth to give them the confidence to sell.
Well, there’s plenty of evidence to feed vendors’ confidence now, with recent price growth nothing short of spectacular and no signs of it slowing down.
Last month, national home values rose at their fastest pace since 1988, according to CoreLogic. Sydney values rose by a remarkable 3.7% in just four weeks, Canberra 2.8% and Brisbane and Melbourne both 2.4%.
Over the past three months, homes prices in these cities have risen by 6.7%, 6%, 4.8% and 4.9% respectively. In regional areas, home values have gone up 7% in Victoria, 6.6% in NSW and 5.8% in Queensland. This level of growth would be respectable on an annual basis but this is quarterly!
Despite this, many would-be sellers have held back because low stock also means it’s harder to buy back in. This has resulted in a very tight supply/demand stalemate, with the total number of homes for sale nationwide now -25% below the five year average due to a very rapid rate of sales.
However, there’s always a tipping point when sellers seem to decide en masse that the market is just too good to ignore and it’s time to list. This usually results in a continuing trend of rising stock and eventually, supply catches up to demand and the market calms down a bit.
New data for the month of March indicates this trend might be starting now. CoreLogic says new listings (less than 30 days old) nationwide were 8.1% higher last month compared to March 2020 and are also now 3% above the five year average.
This isn’t enough to be noticeable in local markets but the important thing is that more homeowners are selling. This is great news for frustrated buyers, however it will take a while for higher stock levels to impact prices because demand is clearly several levels above supply at the moment.
Also, supply is likely to stay tightest in the more aspirational areas where most homeowners want to upgrade or downsize in the same suburb.
Buyers should try to keep in mind that the current frenzy won’t last forever and it’s important to stick to your budget. Interest rates aren’t going to change for a long time, which means it will remain relatively easy to afford your loan repayments, even on a higher purchase price.
I learned early in my career that fate plays a hand in finding the right home. Go hard for what you’re after but when you miss out, try to accept that it wasn’t meant to be and move on. There will always be other options and this latest data suggests there will be more options available to you soon.
The views expressed in this article are an opinion only and readers should rely on their independent advice in relation to such matters.
This article originally appeared in The Real Estate Conversation (April 12, 2021)
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