Despite a drop in transactions and lowered consumer confidence, positive growth in dwelling values has been recorded in most regions across the country, with national house prices up by 0.3% in April.
National property values: April 2020
Overall, dwelling values have increased by 0.3% for the month, 2.1% for the quarter, and 8.3% compared with this time last year. According to CoreLogic, Australian housing values have shown no evidence of material decline in April.
While most regions have shown an increase in dwelling values, the pace at which values grow has slowed, dropped from 0.7% in March, to 0.3.% in April. This slowdown has meant that April’s result is the smallest month-on-month movement since June 2019.
According to Mr Tim Lawless, CoreLogic’s Head of Research, while housing values were up in April, the trend weakened from mid-to-late March. This time period coincides with the implementation of social distancing policies, which had a large effect on consumer confidence.
While dwelling values have generally improved, home listings are 35% lower year-on-year, and 43% lower than the five-year average. However, there’s a silver lining to lowered activity; according to Mr Lawless, lower supply may protect housing values.
“The reduction in advertisement stock levels at a time of low demand is another factor that should help to insulate housing values from a more material downturn,” he said.
According to CoreLogic, Australian housing values have shown no evidence of material decline in April.
Interestingly, it’s the most expensive housing markets that are being impacted the hardest. CoreLogic’s stratified hedonic index shows that the top quartile of the housing market has weakened the most, with quarterly gains reducing from 6.6% towards the end of 2019, to 2.4% over the three months ending with April.
Across capital city housing markets, the top quartile recorded a 0.1% lift in home values, compared with a 0.3% increase across the middle of the market and a 0.2% increase across the lower quartile. This downward trend was most pronounced in Melbourne’s upper quartile market where dwelling values were down 0.8%.
This is in line with what we’ve seen in the past, as premium housing markets have been more reactive to changes in the economy.
Across the board, every capital city except Melbourne and Hobart recorded an increase in dwelling values in April. But, capital city markets showed weaker performance compared with regional markets.
Sydney and regional NSW
Regional NSW property values
Despite lowered sales activity and poor consumer sentiment, Sydney home prices still managed a small increase in value throughout April.
According to CoreLogic, the city’s median dwelling price, which consists of data from house, unit and townhouse sales increased by 0.4%. While this is still a win, we need to consider that six months prior to March we were seeing average monthly growth of 1.7%, so growth has definitely slowed.
Sydney’s median price for a home is now $889,992. This is 14.3% higher than it was at the same time in 2019.
Sydney’s upper quartile of the market which usually leads the pace of growth recorded the lowest monthly rise at 0.3%. The middle of Sydney’s housing market, by comparison, recorded a stronger change in dwelling values at 0.6%.
According to Mr Lawless, “There’s a few reasons Melbourne and Sydney are moving into negative territory.”
“In many ways they were overvalued before moving into this period of disruption,” he said.
In regional NSW, combined dwelling values inched up by 0.4% in April, with houses increasing by 0.4% and units increasing by 0.6%.
Melbourne and regional VIC
Regional VIC property values
Apart from Hobart, Melbourne was the only other capital city that recorded a negative change in dwelling values for April, with a drop of 0.3%. However, this figure should be taken with a pinch of salt. This doesn’t mean that all dwellings went into the negative.
It was actually the upper quartile of Melbourne’s housing market that had the biggest impact on aggregate measures. The upper quartile of Melbourne’s market showed the sharpest drop, falling by 0.8% in April, while the lower quartile and middle of the market continued to record a small increase in value over the month.
Regional victoria on the other hand has performed relatively well. Dwelling values for the month show an increase of 0.9%, with houses up by 0.8% and units by 1.4%.
Brisbane and regional QLD
Regional QLD property values
In April, dwelling values for properties in Brisbane increased by 0.3% for the month. This takes Brisbane’s median price for a home to $507,982. This is 8.0% higher than it was at the same time in 2019.
Regional Queensland dwelling values improved slightly as well, growing by 0.2% in April.
According to Mackay real estate agent Mr Ben Chick, the second half of March was an incredibly busy period for him and his team.
“We had 50% more sales enquiries on property than we had the first half of the month. It’s like someone turned on the tap,” he said.
In terms of prices, Mr Chick also says that in his regional Queensland market, he hasn’t witnessed a sharp decline.
“We’re seeing the high end $500,000+ market (in Mackay) move exceptionally well, because those people have more employment security,” he said.
Hobart and regional TAS
Regional TAS property values
Hobart was one of the regions that recorded a slight decline in home values over the month, recording a change in dwelling values of -0.1%. However, on an annual basis, dwelling values are still up 5% compared to where they were this time last year.
According to Mr Lawless, Hobart has the most exposure of any capital city to industry sectors that are most impacted by Covid-19. 12.7% of the workforce in Hobart is employed within the food, accommodation, arts and recreation services, which would all have been heavily impacted by the government’s social distancing regulations.
It’s definitely not all bad news. For the rest of Tasmania, dwelling values were up 1.3%, with units leading the charge with growth of 2.8% in April.
Canberra and the ACT
Canberra dwelling values held steady in April, neither moving up or down. However, compared to this time last year, dwelling values are up 4.3%. In April, house values inched up by 0.1%, while units declined by -0.4%.
While dwelling values haven’t seen huge gains, analysis performed by OpenAgent data scientists reveals that one particular area of Canberra is currently performing better than others in terms of the time it takes to sell.
This area is the Woden Valley, consisting of suburbs like Kambah, Curtin, Mawson, and Phillip, where it’s currently taking 23 days on average to move stock. This is faster than anywhere else in the ACT.
According to Canberra real estate agent Greg Ward, he hasn’t noticed a huge change in the market.
“There is a supply issue at the moment where three are more buyers but lack of property, so when they do come on the market they get snapped up pretty quickly.
“I think we’re pretty well protected by the Australian government because there are a lot of public servants in the ACT. A lot of these people still have their jobs, so there is plenty of cash flow,” he said.
According to data released by Realestate.com.au, March property enquiries from first home buyers in Canberra had grown 56% year on year.
“There is strong demand for property so we have been getting really good prices for the majority of homes,” Mr Ward said.
Adelaide and regional SA
Regional SA property values
In Adelaide, dwelling values increased by 0.4% in April, 0.8% over the quarter and 1.5% compared to this time last year. Monthly gains in terms of dwelling values were on par with Sydney, which posted growth of 0.4%.
OpenAgent analysis of current days on market shows that the eastern suburbs of Adelaide are moving stock the fastest, with the median time to sell since social distancing measures were announced coming in at 28 days. This area consists of suburbs such as Norwood, Unley, Fullarton and Magill.
According to Alexander Ouwens, Co-Director of South Australian real estate agency Ouwens Casserley, April was a strong month for their Unley branch, which sold 10 properties in one week.
According to Mr Ouwens, his top agents say it’s a great market to sell in as buyers are able to be qualified more thoroughly before showing them through a property.
Regional South Australia was the second strongest performer when compared to regional markets in other states. Regional South Australia posted positive growth of 1.0% and 9.0% growth year-on-year.
Units in regional South Australia grew the most, recording a monthly increase in value of 8.4%. This is the highest April unit growth at a regional state level across Australia.
Domain Senior Research Analyst, Dr Nicola Powell noted that Adelaide was due to it having quite a stable market.
“Adelaide is somewhat insulated from a downturn in terms of foreign buyers and investors, it’s largely an owner-occupier market,” Dr Powell said.
Perth and regional WA
Regional WA property values
Over the past month dwelling values in Perth increased by 0.2% and by 1.0% over the quarter. Regional Western Australia posted stronger performance in April, with dwelling increasing by 0.8%.
According to Real Estate Institute of Western Australia President Damian Collins, this is the six month in a row where home values have increased or stabilised.
“It’s positive to know that despite the current economic conditions, sellers are not being forced to sell and lower their sales price to do so.
“Another positive for sellers this month is that it is quicker to sell a house now than it was a year ago, with median days to sell sitting at 65 compared to 77.”
And according to Mr Collins, the market seems to be picking up.
“During the month we saw weekly sales transactions sitting at a low of less than 300 per week, with the exception of last week which was over 430 transactions,” he said.
Darwin and regional NT
Regional NT property values
Darwin posted the highest monthly growth of all capital cities, with dwelling values up 1.7% in April, outperforming its six month average pace of growth. This brings the median property price to $402,225.
The same pattern followed with monthly growth for Darwin houses and units, which posted growth of 1.1% and 3.1% respectively. These figures are higher than the unit and house growth we see in any other capital city.
Houses in regional areas of the Northern Territory unfortunately recorded negative growth of 0.8%.
Rents and rental yields
With Australian borders remaining closed to tourists and continued restrictions on short term rentals, an influx of properties have entered back into the rental market resulting in a surge in supply. Job loss from tenants have also resulted in a decline in demand as many negotiate lower rent or choose to move back in with their parents.
These combined pressures of higher supply and lower demand has weakened rents further in April with rents down across seven of the eight capital cities. The largest drops are seen on the east coast with rents falling -1.1% in Hobart, -0.7% in Sydney, -0.7% in Canberra and -0.5% in Melbourne.
Perth is the only capital city to see a lift in rent over April with an increase of +0.1%.
When looking at gross rental yields, Sydney reaches a new record low of 2.92% while Darwin comes out on top as the capital city with the highest rental yield of 5.8%.
In regional areas, regional Vic has the lowest rental yield in April at 4.5% while Regional NT records +6.7%. The national gross rental yield sits at +3.7%.
What does this mean for the Australian property market? What is the outlook for the months ahead?
The rental market
The rental market is expected to be impacted more significantly in the coming months. According to Tim Lawless, rental yields in Sydney and Melbourne are likely to reduce further as vacancy rates rise with lower rents. Australia’s largest cities have a higher level of risk compared to other markets due to their high exposure to overseas migration as a source of housing demand and downturn in foreign students.
While there has been a significant drop in transaction volumes and listings, Australian housing values have remained resilient, posting and increase over the month.
Mr Lawless states that “the magnitude of housing values falls depends on a broad range of factors with most hinging on the timing and extent of social distancing policies being lifted.”
The good news is that so far, the strong effort by Australians to social distance has been successful in flattening the spread of Coronavirus as the country’s cases fall below 1,000 for the first time in over five weeks.
State Governments around Australia have announced plans to slowly lift restrictions. This week, the Western Australian state government announced an ease on restrictions which will allow up to ten people at a time to attend open homes or visit display homes.
Mr Lawless concludes that the coming months will provide more clarity on the direction of the housing market and one of the most important indicators for the property market is consumer sentiment. "If consumer spirits start to bounce back to more normal levels, this is when we should start to see housing activity lift from their current low levels".