PROPERTY LISTINGS MARGINALLY INCREASE IN FEBRUARY - SQM Research Residential Newsletter 3 March 2020

National Property Listings Marginally Increased in February
Louis Christopher, CEO

Figures released today by SQM Research reveal national residential property listings increased marginally in February by 0.2% from 295,295 in January 2020 to 295,969. Compared to 12 months ago, listings were down by 13.8%.

Sydney, Melbourne and Canberra were the only capital cities to experience increases in property listings over the month with the largest increase in Melbourne of 10.0%, followed closely by Sydney with a 9.9% increase. Canberra had a smaller 3.8% increase in listings.

Hobart, Adelaide, Perth and Brisbane all recorded a decline in property listings.

Year-on-year listings show declines for all capital cities with Sydney recording a significant decline of 26.0% and Darwin a 25.7% decline this time last year.

The month of February traditionally records a rise in properties listed for sale as the new year is well underway, this is evident in Sydney, Melbourne and Canberra whereby new listings skyrocketed by over 60% compared to January. However, we are down for the year in all cities as absorption rates have picked up. There are many more buyers now compared to last year and so surplus stock is being sold and taken off the market.

Asking Prices

Capital City asking prices decreased by 0.7% for units and increased 0.7% for houses, over the month to 3^rd March 2020. Unit asking prices are now at $573,700 and houses $983,900.

Compared to a year ago, the capital city asking prices posted increases of 8.3% for houses and 0.4% increase for units. It has been apparent to SQM research for sometime that unit prices in Sydney and Melbourne in particular, have lagged behind the price gains recorded for houses. This maybe a result of ongoing caution surrounding the structural quality of new apartment buildings.

Over the month, Brisbane and Hobart both recorded increases in both house and unit prices. Hobart showing a significant 6.4% increase in unit prices over the month.

Sydney saw an increase of 1.3% for houses and decrease of 1.6% for unit prices over the month, whereas Melbourne, Adelaide, Canberra and Darwin experienced decreases in house prices and increases in unit prices. Melbourne decreased 0.4% in house prices and increased 0.8% in unit prices; Adelaide, 0.2% decrease in house prices and 0.6% increase in unit prices.

Darwin’s unit market has turned around from a 20.5% decrease 12 months ago to a 3.5% increase over the month.

Perth was the only city to post declines in both, house and unit prices, 0.2% for houses and 0.7% for unit prices. A year ago, Perth’s asking prices for houses and units also experienced a decline of 2.2% for houses and 3.8% for units.

Year on year, Sydney’s asking price for houses showed an increase of 10.3% and 0.2% increase for units. Melbourne’s house price experienced an increase of 8.0% a year ago but now has falls of 0.4%.

Coronavirus and the Property Market
Louis Christopher, CEO

For those of you who are very concerned about coronavirus, you may find this link very interesting: Click here.

It is very balanced (yet a frank) assessment and given what I think is unprecedented mass fear in our current generation, timely.

Here is another link which I have found to be accurate regarding the statistics surrounding coronavirus.

The most insightful charts in my opinion are the “Outcome of Cases” and “Active Cases” charts. Both need to be read with caution as cases with an outcome currently suggest a 6% fatality rate. But note the ongoing downward trend in the chart. It is falling because the first cases reported were effectively people on their death beds. There were no testing kits for the wider population (and there are still current limitations on wider testing) but as more testing for coronavirus is increased, we will see that this is not likely to be as deadly as first feared.

And active cases are reducing which is very welcome, however with the outbreak now occurring worldwide, I suspect this is going to be on the rise again.

And now with our first human to human transmission in Australia reported yesterday, it begs the question how will our authorities will respond to the crisis? In my view, if we start to see accelerating human to human transmission and case fatality rates still at 2% plus, expect many public events to be cancelled and indeed school closures. Perhaps even public transport closures if things get really bad.

All these actions to prevent/slow transmission could hit the economy hard. Very hard.

Our hospital system, already at stretching point, could easily be overwhelmed.

So if the virus persists up through to and including winter (the peak season for influenza) we could very easily have three-quarters of negative GDP growth. Most certainly with the bush fires and Coronavirus, the March quarter will be a total write-off. We still don’t know what has transpired for the December quarter but we do know retail sales were weak over Christmas.

This brings us to our housing forecasts:

So far the housing market has operated resiliently. Auction clearance rates have been strong right throughout February and as our listings data released today reveals, turnover is high. I believe our base case price forecasts for 2020 are right on track.

But now with today's 25 basis point interest rate cut from the RBA this brings our other scenarios into play, namely Scenario 2 which took into account a rate cut by April. Under this scenario dwelling prices are forecasted to accelerate over and above our base case forecast. National dwelling prices under scenario 2 are forecasted to rise between 8% to 13% driven by surging Sydney and Melbourne housing prices.

However, scenario 4 could play out where: If the Coronavirus becomes all encompassing, people will want to avoid places of congregation which may include property site inspections and public auctions.

Agents should be thinking now what contingency plans they can go with in such an event e.g perhaps running more private site inspections; more videos of the property concerned; allowing for video conferencing of the auction.

Our forecasts released back in November 2019 took into account a scenario whereby the RBA was forced into cutting interest rates to zero. This is effectively scenario 4. Far from boosting up property prices, our model suggests the market would stall. The reason? An economy in recession means rising unemployment creating more forced sales and zero confidence to go buy a house.

If Coronavirus triggers a full scale deep recession creating a meaningful rise in unemployment, housing prices will very likely fall.

Then again, if we have large cuts in interest rates plus emergency fiscal stimulus – in others words a very strong, pre-empting economic response from our Federal government, this might reduce the fear provided the coronavirus behaves itself.

However, the decision to close say public events, schools, even public transport, I think would negate whatever confidence an aggressive stimulus package would bring to the table. It is all very well to have your monthly mortgage repayments modestly reduced once again and perhaps to receive some free money in the bank, but I hardly think this will be front and centre of your thought process if you are too fearful to step outside.

For me, while I have been watching this very closely and have been concerned about developments, I am inclined to think we are actually close now to peak fear of the virus. Yes, there will be wider spread. Yes, there is a real risk our hospitals will struggle to cope. But eventually we will collectively get to the point of adjusting and coping and ‘getting on with it’. Our species has faced far worse threats. We have survived world wars and the black plague! So we will easily pass though this as well.

DISTRESSED PROPERTY OF THE WEEK

4/321 Wanneroo Road, Balcatta WA 6021

click to enlarge

This 2 bedroom, 1 bathroom townhouse in the north-west suburb of Balcatta in Perth, is currently listed for sale with a price of "from $299,000". It was initially listed for sale as an “Expressions of Interest” in November 2019 and last sold for $319,000 in December 2012.

Sitting on a 227 sqm block, the home offers low maintenance living with open-plan living areas, private outdoor entertainment area and low maintenance gardens and a car space.

The home is located close to a host of amenities including schools, local supermarkets, shops, restaurants, parks and public transport. It is ideal for a family, first home buyers or investors.

Unit prices in this postcode range between $335,000 to $400,000 and for houses expect to pay between $500,000 to $585,000. Asking prices for units have been increasing by 2.3% over 3 years and 12.4% over 12 months. More recently there has been a significant 10.1% increase over the month. After a decline of 0.7% over 12 months, house prices are also starting to see increases with a 2.3% growth over the month.

Asking rents in this postcode has also experienced continued improvements with unit asking rents increasing 11.0% over 12 months and 5.8% over the last month. House asking rents have also shown significant growth of 8.9% over 12 months but has declined 0.5% over the last month.

Investors can achieve gross rental yields of 4.7% for units and 4.0% for houses. Vacancy rates have declined from 3.0% in January 2019 to 1.6% in January 2020.

There have been small boosts to Perth’s housing market but there is still some way to go before the market fully recovers. This could be a good opportunity to purchase in a popular suburb whilst the market recovers.

For a more indepth look at the property market for 2020, subscribe to Christopher’s Boom and Bust Report 2020.

SQM website also features free property data that is now more interactive, easier to navigate and user-friendly, so keep monitoring this market’s growth at SQM Research’s free property data. Also consider the SQM Property Explorer product for more in-depth data and property price estimator.

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