Random Takes on the Housing Market
by Louis Christopher, CEO
Auctions
The year is opening up with a surge of auction activity. Sydney and Melbourne are holding double the number of auctions on compared to this time last year. Why is this happening? Firstly, due to last year’s lockdown and in some states, outright closure of the housing market, people were frustrated in being able to settle their various affairs, whether that be buying a first home, changing cities, upgrading, downgrading, selling deceased estates, etc. Much of this activity could not be done. But now, with most restrictions lifted and Covid essentially eliminated from the community, people want to complete these activities. And they are also aware that at anytime, restrictions easily be placed on them once more.
But it is just as likely that buyers wish to purchase in earnest given the interest rate cuts rates of last year (and late 2019 for that matter) plus the increasing chatter of the market recovery is reminding many buyers to get on with it. Sellers are also keen to move now given they are likely to fetch a good price and for most of the other reasons mentioned above. So there is going to be a lot of agreement between buyers and sellers over the next few weeks.
A Reminder of our Capital City Forecasts
Our bullish base case assumed extension of Job Keeper (or package very similar) plus the extension of quantitative easing (digital money printing). Scenario 2 assumed Job keeper ending as planned and QE ending as planned. Scenario 3 assumed QE extended somewhat combined with surge in jobs creation and the vaccine going well.
Based on recent Federal Minister comments, it doesn't look like Job keeper will be extended to any great affect (we wait and see). So increasingly it is a race between Scenarios 2 and 3 right now.
Scenario 4 is still in play, particularly after the news that the EU is suspending vaccine distribution until they have their share first. While assurances have been made that we still have a supply source, it does go to show Covid (more so the responses to Covid) remains a fluid and volatile event.
In all cases Perth remains our most bullish prediction. A forecast of 8-12% with potentially more on the table if everything goes right in the economy (Scenario 3). As far as I can recall (and as far as the data allows) Perth is a city where the rental market front runs the overall housing market.
So what does our data show for the Perth rental market?
A massive shortage of rental properties driving up rents by 12% per annum and likely to go up more. No question, this intense level of demand with a simultaneous drip in supply will mean big price gains for 2021. The current lockdown is not likely to change this scenario other than if we see an extended period of lockdown going on for months as what happened with Melbourne.
More on our 2021 Forecasts can be found in our 2021 Housing Boom and Bust report, released last December.
Melbourne CBD Rental Market has crashed
Speaking of which, I have pointed this out multiple times over 2020 that there were big problems for landlords in our CBDs. We were the first to bring to the attention the surge in CBD rental vacancy rates back in April. Now its time to look at the score board for it shows the result. Melbourne CBD unit market rents are down 33% over the past 12 months.
We know the reasons why. People have been wanting to escape high density locations where outright lockdowns can occur at anytime. Going forward, if we have an extended virus free period, perhaps people might start to come back to the inner urban and city CBD locations, particularly in slight of the massive discounting in rents. You can now rent a 2 bedroom unit in Melbourne CBD for just $400 a week. Its about the same rent compared to what is on offer out in Melbourne’s Eastern suburbs.
Sydney Regions
Over the weekend I conducted radio stint with 2GB’s Chris Smith who also has his own show on Sky News. This one was focussed on what is happening with the Sydney regions. If you have an interest in the various sides to the Sydney housing market, you should enjoy this segment which can be found by clicking here.
More info on our various regions covering all of Australia can be found here for free. Just scroll down a little on the link and you will see the drop down menu to all the various regions we have:
PROPERTY LISTINGS DECLINE IN JANUARY
by Louis Christopher, CEO
Figures released today by SQM Research reveal national residential property listings decreased in January 2021 by 2.9%, falling from 272,999 in December 2020 to 265,116. Compared to 12 months ago, listings were down by 10.5%.
All capital cities experienced decreases in property listings over the month except for Perth which had a 0.1% increase in listings. The largest decrease was in Melbourne of 4.7%.
Year-on-year listings also show larger declines for most capital cities with the exception of Sydney and Melbourne, both recording increases of 4.5% and 21.1%, respectively.
New Listings (30 days)
Nationally, new listings (30 days) decreased by a 24.46% over the course of January with 16,234 less properties on the market. Hobart’s new listings decreased by a significant 33.28%, followed by Canberra which decreased by 26.10%. Sydney recorded the lowest decrease in new listings of 2.42%.
Asking Prices
Capital City asking prices declined by 0.7% for houses but increased 0.2% for units, over the month to 2 February 2021. The new year commenced with unit asking prices at $565,600 and houses $996,800.
Compared to a year ago, the capital city asking prices posted increases of 2.0% for houses but a decline of 2.1% for units.
Over the month, Melbourne and Canberra were the only capital cities to record decreases in both house and unit prices - 0.4% and 0.2% respectively for Melbourne and 0.2% and 0.7% for Canberra house and unit prices.
Perth, Adelaide and Darwin all recorded increases in both house and unit prices over the month to 2 February 2021.
Sydney recorded a decline in house prices of 1.7% but an increase in unit prices of 0.2%. Brisbane also recorded decline of 0.3% in house prices and an increase of 0.6% in unit prices. Hobart recorded an increase of 0.6% in house prices and decline of 0.5% in unit prices.
Commentary
The month of January traditionally records falls in properties listed for sale as the market is still in a summer holiday mode. This year was no exception. However, when we consider the number of new listings compared to January 2020, there was a material rise in nearly all cities. This finding is consistent with the observed early start to the auction market over January and February.
AUCTION RESULTS for week ending 31 January 2021
Full individual auction results can be found on our website:
AUCTION LISTINGS* for week ending 7 February 20210