If there’s one word to describe the Australian property market, it’s resilient. Even among the tumult of 2020, prices have stayed relatively steady across the country – defying pessimists who predicted otherwise.
As we enter a new financial year, the forecast for buyers and sellers alike is pretty positive. Sellers can feel confident that they’ll achieve their market price, while buyers are enjoying record low interest rates across all the major lenders.
Record low interest rates are here to stay for a while
At their June meeting, the Reserve Bank of Australia (RBA) kept the cash rate and three year bond rate target on hold. This was expected, with the RBA signaling that they don’t expect to recommend an increase any time soon and possibly for several years. The Board stated that it “will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band… It is likely that this fiscal and monetary support will be required for some time”.
This has boosted the confidence of first home buyers, who are benefiting from record low interest rates that are set to continue for some years to come.
Median house prices have fallen slightly but are up on 2019
The CoreLogic home value index indicates that in May, house prices fell across the eight major capitals for the first time in a year. However, this is better news than it appears because the total fall was just 0.5%.
There was a further softening in June for Sydney, Melbourne, Brisbane/Gold Coast, Adelaide and Perth with an aggregate fall of 0.85%. However, Canberra, Hobart and Darwin all increased in value.
The year-on-year gain (that is, house values in June 2020 as compared to June 2019) show strong increases across the country. The aggregate increase was 9.04% with every city except Darwin recording gains.
Sydney had the highest increase, with house values growing by 13.32% over the last 12 months. Adelaide’s 2.04% was the lowest.
While the last couple of months reflect the uncertainty of the times, there are several indications that consumer confidence is now trending upwards.
Listings are on the rise
More proof that confidence is on the rise is the increase in new housing activity. After-sales dropped by 33% in April as open inspections and auctions were banned, and would-be sellers adopted a wait-and-see approach. In May, the trend largely reversed itself with an 18.5% rise in new listings, and in June they were tracking close to last years’ levels
If you do put your home on the market, you’re just as likely to sell it now as you were a year ago. The number of properties moving from ‘for sale’ to ‘sold’ in the last week of June 2020 was just 0.4% lower than the same time last year.
In fact, buyer demand is higher than ever — probably driven by lower numbers of properties for sale. There’s a 50% increase in property searches from 1 April to 1 July, and searches are 25% up on July 2019.
Prices fluctuate across the country but have stayed broadly stable
Bit here about the major capitals, price drops in each, the fact that most of the issue continues to be with Syd/Melb.
CoreLogic head of research Tim Lawless recently said:
“Considering the weak economic conditions associated with the pandemic, a fall of less than half a per cent in housing values over the month shows the market has remained resilient to a material correction.
“With restrictive policies being progressively lifted or relaxed, the downwards trajectory of housing values could be milder than first expected.”
Rental prices are down in some states and steady in others
The news for investors is more or less positive depending on where you own property.
In Sydney and Melbourne, one in three rentals have discounted their asking price in recent months. Properties which would ordinarily attract international students, new migrants and people transferring to the capitals for work have been particularly hard hit. Darwin, which has a high population of itinerant and international workers, is similarly weak.
Away from these capitals, rentals have stayed very stable. Rents were up in Adelaide, Brisbane and Perth, up for units in Canberra and up for houses in Darwin. Nationally, they’re up 0.4% over the past month and 1.4% over the past year.
Renter activity is up 102.9% from its low in March as employment situations stabilise and government subsidies hit their target. And because investors are holding off on buying new investment properties, the number of new rental properties is also shrinking: meaning that if you already own a rental, you can benefit from increased demand.
Whether you’re buying, selling or holding onto an investment property, here’s hoping that 2021 is the year for you!