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Property Prices Holding Up Well During May

8th June 2020
Hi <<First Name>>,

It was very likely that when the latest CoreLogic data was released on house prices, there were a number of doomsayers who were a little disappointed. 
 
While prices across the major capital cities did decline by -0.5 per cent, this is a long way from the 30 per cent falls that some were suggesting. 
 
Overall, while there has been some mild weakness, even the analysts at CoreLogic, pointed out just how ‘resilient’ the property market appears to be at the moment. This is really positive for what might lie ahead. 
 
Around the country, we saw that Melbourne was the worst performer with falls of -0.9 per cent. Sydney also fell away slightly by -0.4 per cent. 
  
These two markets, in particular, have been negatively impacted more so by the lack of auction activity, and that is clear when you examine where the largest falls came from. According to Corelogic the top end of the market, the vendors that are more often than not looking to sell via the auction process fell away more than other areas. 
  
In Melbourne, the most expensive properties in the market recorded a1.3 per cent drop in values over the month, compared with a 0.6 per cent fall across the broad ‘middle’ of the market. It was a similar situation in Sydney’s more expensive properties falling -0.6 per cent. 



Source: CoreLogic

During the lockdown period, there were many vendors forced to sell using private treaty or even online auctions, which has made it a tricky time to transact properties. Or at least different to normal market conditions.

But again, prices have really not moved all that much as a result. We just have to look at what the annual data is telling us and we can see that both Sydney and Melbourne again come out on top.

Values across Sydney are up +14.3 per cent annually with Melbourne +11.7 per cent. Prior to COVID, auction clearance rates were pushing into the high 70s and low 80s which is not a sign of a weak housing market.

Certainly, COVID has created some fear and uncertainty and more than anything that has weighed on consumer sentiment. As the economy reopens and the states unwind their social distancing measures, we can see sentiment improving by the week with a very sharp bounce in May.
















Are We in a Recession? 

On top of the slight dip in house prices, the very same doomsayers were up in arms at the fact that Australia was staring down the barrel of its first recession in 30 years. The definition of a recession is two consecutive periods of negative economic growth. Based on the data this week, it looks like Q1 of 2020 is showing negative growth, albeit only marginally at -0.3 per cent and everyone expects the June quarter to be terrible.




Some of the reasons for this were falls in consumer spending (-1.1%), while housing construction (-1.7%) and business investment (-0.8%) also fell. It isn’t surprising to see consumer spending fall, when the country is in lockdown, so that is likely to start increasing rapidly.

We’ve also seen the announcement this week of the ‘HomeBuilder’ grant which is aimed at boosting the construction and building industry. While many builders have been carrying on working throughout the lockdown, the number of people that have put projects on hold has been worrisome. The new stimulus will see those building or renovating homes (under certain criteria) receive a $25,000 grant.

The Housing Industry Association estimates at least 14,000 renovations costing over $150,000 are undertaken every year, so there will be plenty of people who will qualify for the grants. This will hopefully have its intended effect and start to boost the sector - albeit as a short-term measure.






According to the latest ANZ research, confidence has been bouncing back and has been getting gradually higher for the last nine weeks as well.

As confidence rises, stimulus measures continue to roll out and social distancing measures continue to ease, we may well see a minor dip in housing prices rather than the worst-case scenarios that have been highlighted in the public media.

Given the extent of the Monetary Policy easing with the cash rate now at 0.25 % and ongoing RBA intervention to ensure ultra-low rates at least for the next few years, there is every reason to be confident that house prices will continue to buck the trend and remain resilient.
  Best Regards,

   Dr Andrew Unterweger
MB.BS, CFP®, Dip FNS, Dip FP, FPA, SMSF, AFA,MFAA, LREA
   
Chairman
   
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DISCLAIMER - The information contained in this publication has been obtained from various sources and does not necessarily represent the views or opinions of Wise Guru Limited ( Wise Guru ). This information is provided for general information purposes only and is not intended to constitute legal, financial or other professional advice and has not been provided with regard to the investment objectives or circumstances of any particular individual. While based on information believed to be reliable, no guarantee is given that it is accurate or complete and no warranties are made by Wise Guru Ltd as to the accuracy, completeness or usefulness of any of the information in this publication. The opinions, forecasts, assumptions, estimates, derived valuations and target price(s) (if any) contained in this material are as of the date indicated and are subject to change at any time without prior notice. The information referred to may not be suitable for specific investment objectives, financial situation or individual needs of recipients and should not be relied upon in substitution for the exercise of independent judgment. Recipients should obtain their own appropriate professional advice. Neither Wise Guru Ltd nor other persons shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this material. No representation or warranty is given as to the likelihood of achievement of any forward-looking statement in this document, or any events or results expressed or implied in any forward-looking statement. Such statements are not guarantees of future performance and are by their nature subject to significant uncertainties, risks and contingencies. Actual results or events may differ materially from any expressed or implied in any forward-looking statement and deviations are both normal and to be expected. All opinions and estimates in this information are subject to change without notice. Wise Guru is not under any obligation to update this information to the extent that it is or becomes out of date or incorrect. This material may not be reproduced, redistributed, or copied in whole or in part for any purpose without Wise Guru Ltd.’s prior written consent


About

Dr Andrew Unterweger
MB.BS, CFP, Dip FP, Dip FNS, AFA, SPAA, MFAA, Executive Chairman

 

Andrew obtained a Bachelor of Medicine and Bachelor of Surgery from the University of Queensland and a Diploma in Financial Planning from Deakin University, is a Certified Financial Planner and member of the Association of Financial Advisers, FPA, SMSF and the MFAA.

Andrew has a successful Financial Planning business in Sydney and is well known in the industry with his years of experience & knowledge.
Andrew developed a business in Real Estate & Finance as he saw these needs by his clients. These businesses provide a hand-held service to our clients which takes the stress out of the process especially for time poor Executives & Professionals.

With all the legislative govt changes and new rules affecting lending and property ownership its important to get it right.

At Wise Guru we provide a tailored concierge service for each of our clients from identifying the right property, analysing and managing your cash flows, arranging finance and ensuring the correct structure, and working with a team of professional settlement agents and property managers to ensure your property is tenanted, saving you time and money.




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