What Do The Potential Vaccine Announcements Mean to Australia's Property Market?
Since the US election the world has had some promising news regarding potential vaccines. Here is a look at these and what the latest property data is showing us.
Earlier in November Pfizer1 and its partner BioNTech, announced that its COVID-19 vaccine candidate demonstrated an efficacy rate of more than 90% in a trial of 44,000 patients.
Last week, Moderna2 announced that its COVID-19 vaccine candidate was showing a 94.5% success rate in a trial of more than 30,000. Combine this with the promising news from AstraZeneca that it too will release interim data on its COVID-19 vaccine as early as December, it is looking promising that the world may have a number of vaccines approved by the start of 2021.
With Australia backing two of these trials, while we need to be measured in our enthusiasm until the trials have been completed, seeing positive results certainly gives hope to the prospect that the safe reopening of the global economy is within reach.
From a local perspective we’ve managed to pretty much flatten the curve, our economy is holding up well and our political systems are stable, in fact the most stable they have been in some time. We are also benefiting from the lowest interest rates in history and there is confidence amongst the banks to lend to Australians who can borrow which is excellent news.
All of these variables are supporting a rise in consumer sentiment. According to CoreLogic’s recent Weekly Market Update3 the “Westpac/MI index rising another 2.6% in November to be 35.5% higher over the past three months. This index is now well above pre-COVID levels to be the highest reading since Nov 2013.” With people’s decision to buy, sell and consume based on how confident they feel, this is yet another positive sign we are moving in the right direction.
Whilst we are yet to see the direct impact of the election, and the potential vaccine discovery in any official reporting, looking at the most recent data from CoreLogic, housing values are trending higher across every capital city including Melbourne, the average selling time has reduced, and mortgage activity has rebounded strongly. In addition, new listings have seen a strong increase of 19% in the four weeks ending 1 November as restrictions around property transactions eased in Victoria.4 Whilst nationally, total listings are still about 20%4 below the equivalent period in 2019, it could be anticipated that as consumer sentiment continues to rise and stability is felt across the globe that this will increase.
Looking further ahead, once borders are open and travel is allowed, Australia could see a surge in migration. In the McGrath Report 2021 it is noted ‘throughout history, after major global catastrophes including the Spanish Flu, World War II and the global financial crisis, Australia has been seen as a safe haven’. COVID-19 has once again highlighted Australia’s status internationally.
What this means for our local real estate market is when borders open we may see a rise in the number of migrants and expats looking to buy properties. Plus, with record low interest rates and various government incentives also in place we expect local buyer demand to remain high. In fact, according to CoreLogic their ‘Time to Buy a Dwelling’ index was up 8%3 in November to be at the highest level in seven years. With an increase in buyer demand, as with all markets, this will potentially have the flow on effect of rising property prices.
From an investor perspective, the trend of declining investor participation has been fairly consistent across all states.4 However, with low interest rates investors may look to enter the market again. When the borders open again the hope would be migrants and students return to Australia and demand for inner-city rental properties surge once again.
A final word
Whilst it is too early to know exactly the potential discovery of COVID-19 vaccines will have on the Australian economy and real estate sector, but looking at current market data the property market is strengthening. Stability and consumer confidence are key to a strong economy and real estate sector, and for the first time in 2020, things appear to be looking up.
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3. CoreLogic Weekly Market Update Nov 15, 2020
4. CoreLogic Monthly Chart Pack November 2020
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