https://www.mcgrath.com.au/advice/articles/Whats-Really-Happening-To-The-Property-Market-And-Opportunities-For-Buyers-And-Sellers

What's Really Happening To The Property Market And Opportunities For Buyers And Sellers

Sarah Lefebvre
Sarah Lefebvre
08/09/2020 | 5 MIN READ

Latest property price results

Have you noticed in your neighbourhood that properties are still selling and, in many cases, are selling for a good price? Are you finding this is a contradiction to the picture the media are painting that the property market is in free fall?  Whilst the property market constantly shifts, we wanted to help clarify what is going on at the moment; break down some of the data and explore some opportunities we see for both buyers and sellers over the coming months. 


You may recall in March when COVID-19 was starting to spread in Australia, the media were saying the real estate market was going to bottom out. That they were anticipating a drop of 20%  or more. However, currently the Australian housing market has remained relatively resilient through the COVID period.  According to Tim Lawless, CoreLogic’s head of research, “the impact from COVID-19 on housing values has been orderly to-date, with CoreLogic’s national index falling only 1.6% since the recent high in April.” 


To put this in context for you, here is a look at the changes to property values across Australia in July.  You’ll see that the changes are slight across all the capital cities, with both Canberra (+0.6%) 2 and Adelaide (+0.1) 2 posting a slight rise in dwelling values.  And if we look at regional markets the value of properties haven’t changed at all over the last month according to the CoreLogic July Update.

Sydney -0.9%

Melbourne -1.2%

Brisbane -0.4%

Adelaide 0.1%

Perth -0.6%

Hobart -0.2%

Darwin -0.3%

Canberra 0.6%

Combined capitals -0.8%

Combined regionals  0.0%

National -0.6%


Positively if we review at the changes over the last 12 months, the combined property values across our capital cities is 7.9% higher than this time last year.  And in our regions dwelling values are up by 3.9%2.   

Why has the impact to date been softer than first thought?  

Well, it’s due to a number of factors that revolve around the basics of supply and demand.  


From a supply perspective (or how many properties are for sale), due to record low interest rates, government stimulus packages and lenders offering mortgage relief payment plans, we are seeing many property owners have taken a ‘wait and see’ approach and are not listing their property for sale. What this means is there is limited stock across most markets in Australia. This in turn protects the housing market from an oversupply of properties and prevents a significant downturn in pricing.


When we look at the other economic factor of ‘demand’ (or how many people are actively looking to buy a property), we see that in some areas demand is still relatively high. According to data from CoreLogic, there is a ‘strong rate of absorption where demand for established housing stock is outweighing advertised supply. Their latest report shows that that nationally, it took an average of 55 days to sell a property in July versus 56 days in July 20194 . We have seen this trend reflected in our own results, with an increase of 67%3 from buyers enquiring about a property from our website since February.  

What could be driving buyer demand? 

With record low interest rates and an expectation, they will remain low for the foreseeable future, buyers who have stable long-term employment are seeing this as an opportunity to purchase and as a result are injecting a feeling of confidence in the market. 


Additionally, as many investors are sitting out of the market at the moment, banks are more interested in lending to home buyers which is helping them secure pre-approval, so they are in a position to buy. Combine this with the Federal and State Government stimulus packages, buyer confidence although lower than last year is still relatively high considering we are in the middle or a pandemic. 


This trend aligns with our internal data it shows we have had a 67%3 increase in people making enquiries about our properties since February and 32%3 increase in the number of people downloading our buying guides and eBooks since March.  Buyer demand is certainly there at the moment, but with Victoria in the midst of a second wave, how long consumer confidence can remain buoyant remains to be seen. 

Opportunities for buyers and sellers 

Opportunities for sellers

As we have discussed, the simple mechanics of supply and demand are helping to stabilise the property market and limit the price drops. However, with government stimulus due to taper out later this year, and lender repayment holidays expiring in March 2021, the medium-term outlook remains skewed to the downside according to CoreLogic2.  


Whilst the Government, Reserve Bank and Australian Prudential Regulation Authority (APRA) will do all they can to support our economy and minimise the impact of the Coronavirus on businesses and our economy, many experts are predicting due to job losses that more homeowners may unfortunately need to sell their property.  The expectation is that supply will outweigh demand in the next 6 to 12 months, creating a less favourable market for sellers. 


What this means for sellers now is, if you have been considering selling; either to upsize or downsize, move to a school catchment area, or wanting a bigger back yard, perhaps now as the market is relatively stable, it is the time to sell. With uncertainty around what might happen later in the year, selling over the next couple of months could help remove this risk. 


Every local market is impacted by COVID-19 in different ways, talk to your local McGrath Real Estate Agent to find out exactly what is happening in your local area.  Connect with them here

Opportunities for Buyers 

Everyone’s circumstances are different, so there’s no one size fits all answer on whether now is a good time to buy, but as John McGrath commented recently, “We could be entering a window where buyers priced out six months ago now have an opportunity to get in; and with interest rates as low as 2.19 per cent fixed for two years, that’s almost money for nothing.”  


So, if you have stable long-term employment prospects, and are looking to buy a property, you might find there are some positives coming out of COVID-19.

Interest rates are at an all-time low.

The RBA has reduced the official cash rate to its lowest levels of just 0.25% and lenders have responded by also reducing their interest rates to record lows.


What this means is it has never been easier to pay a home loan, so long as you have stable employment. 

Prices are softening 

Before COVID-19, property prices were rising across many parts of the east coast of Australia. COVID-19 changed that, bringing price growth under control and causing prices to fall slightly. As a buyer, as prices are dipping it may be an opportunity to enter the market or consider upgrading.

 

Reports also suggest that the higher value market in Sydney and Melbourne have come off slightly (-2.5% and -5.2%4) giving buyers an opportunity to upgrade with a discount.

Government stimulus packages 

Both Federal and State Governments have implemented a number of stimulus packages to help home buyers.  These are worth exploring particularly if you are a first-time buyer as they can save you thousands:

A final word

What will happen to our property markets will depend on how soon our economy picks up, the level of unemployment reached and the strength of consumer confidence coming out of our recession. Thankfully, with lenders deferring mortgage payments there is currently no forced selling which is underpinning property values. Our economy is proving more resilient than many others around the globe and hopefully 2021 will be a year of economic recovery after a challenging end to 2020. 

 

1. Shane Oliver, AMP
2. CoreLogic July Update
3. Internal reporting data
4. CoreLogic Monthly Chart Pack August 2020

 

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McGrath Limited and its subsidiaries, together with their directors, officers, employees and agents have used their best endeavours to ensure the information passed on in this document is accurate. However, you must make your own enquiries in relation to the information contained in this document and seek advice from your financial advisor, broker or accountant to ascertain its application to your circumstances. 

 

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