Australian property market update - August 2020

By Emily Ng

The latest CoreLogic Home Value Index reveals Australian property prices continued on a downward slope over the month of August. 

Although this marks the fourth month of overall national price declines brought on by the Coronavirus pandemic, the rate of decline has consistently slowed month-on-month with national values down 0.4 per cent compared to 0.6 in July. 

It’s important to note that when we look at property values at a capital city or regional level, not all markets are behaving the same, with home values actually increasing in some geographies.

 
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National property values: August 2020

Houses
$568,833
Monthly change: -0.4%
Units
$513,795
Monthly change: -0.4%

Over August, declines in values have slowed with five of the eight capital cities holding firm or posting slight increases in values. 

Adelaide and Perth prices remained unchanged over the month, with increases in Hobart (0.1 per cent), Canberra (0.5 per cent) and Darwin (1.0 per cent). 

Over August, the capital cities on Australia’s eastern seaboard are the ones that have experienced price declines, although these drops have been quite mild, with Sydney down half a percent and Brisbane declining a mere 0.1 per cent. 

Melbourne led these declines with a 1.2 per cent drop, which has clearly been driven by the implementation of Stage 4 lockdowns in the city. 

Our regional markets continue to outperform their capital city counterparts with combined regional dwelling values virtually flat since May with a median of $395,761. 

Over August, declines in values have slowed with five of the eight capital cities holding firm or posting slight increases in values. 

CoreLogic’s Head of Research, Tim Lawless says lack of overseas migration and increased remote work brought on by the pandemic could be the driving factors behind this result. 

“Unlike their capital city counterparts, which usually receive 85 per cent of net overseas migration, most regional markets have avoided the drop in demand caused by the pause in migration,” he said. 

“Regional markets may also be appealing for their relatively low density and lower price point. The normalisation of remote work through the pandemic could make proximity to major cities less of a factor in home purchasing decisions,” he said.  

CoreLogic Head of Australian Research, Eliza Owen told Domain that while regional markets are faring better, they will not be immune to property value declines. 

“In the short term, regional Australia can’t really avoid a cyclical downturn, because of the shock to employment and incomes that we’ve seen across Australia,” she said. 

Our regional markets continue to outperform their capital city counterparts with combined regional dwelling values virtually flat since May with a median of $395,761. 

Leading into spring, CoreLogic reports new listings have declined 11.5 per cent over the past four weeks. Ms Owen told the ABC that this was an unseasonal decline as “this is a time of year, [where] we’d usually see listings volumes increase in the ramp up to the spring selling season.”

This trend was supported by SQM Research reporting 19,627 less national listings on the market from July to August. 

Managing Director of SQM Research, Louis Christopher comments on these latest figures. 

“There was quite a large drop in new listings for the month predominantly driven by the shortfall in Melbourne. 

“It is reflective of the near entire freeze-up of the Melbourne housing market. As the Victorian State Government is heavily reliant on property stamp duty revenues, there must be a significant state revenue collapse occurring,” he said. 

CoreLogic’s Mr Lawless still maintains the view that while stock levels have remained low throughout the Covid pandemic, they have been a factor in helping to insulate home values. 

“Through the Covid Pandemic to-date, active listing numbers have remained extremely low, demonstrating both a lower than average amount of fresh stock being added to the market and a strong rate of absorption. So far, there has been no evidence of urgent or distressed listings starting to pile up,” he said.

 
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Sydney and regional NSW

Houses
$985,723
Monthly change: -0.5%
Units
$745,168
Monthly change: -0.3%

Overall home values in Sydney were down 0.5 per cent over the month to a median of $860,182. Despite recent falls, over the past 12 months, property values have still shown the highest growth of all capital cities, up 9.8 per cent annually. 

Auction activity in Sydney has remained strong with CoreLogic data showing the number of auctions consistently trending higher, with more homes selling at auction (730 in the week ending 30th August 2020) compared to 590 homes this time last year. 

Eliza Owen told the ABC that “it’s surprising to see that clearance rates have been holding relatively steady across Sydney and that volumes are increasing. 

“For the past four weeks, the Sydney auction clearance rate has held at about 64 per cent, which seems relatively strong amid a pandemic, and weak economic conditions.” 

The highest clearance rates in this period were seen on the Northern Beaches, Sutherland and Inner West regions of the city. 

“The fact that auction results more recently have been strong across the Inner West and Northern Beaches suggests to me that there is still a lot of buyer demand that’s been aided by low interest rates and first-time buyer incentives,” she said.

Despite weakened sentiment, Sydney agents are still reporting great results with one property in St George recently selling $100,000 above the original guide

Regional NSW property prices

Houses
$481,513
Monthly change: +0.5%
Units
$410,023
Monthly change: +0.5%

In regional NSW, property prices performed well, up 0.4 per cent over the month to a median price of $472,011. 

Both regional NSW houses and units have seen positive growth over August with houses rising 0.4 per cent to a median of $486,888 and units gaining a slight 0.1 per cent to a median of $410,044. 

Regional markets in general have been faring better than capital cities as regional areas are less affected by stalling overseas migration, and have shown increased buyer demand for lifestyle properties as remote working becomes the ‘new normal.’

According to the latest CoreLogic Quarterly Regional Market Update, the best performing regional market for houses is the Illawarra region in NSW - recording an annual growth rate of 12.0 per cent in July 2020. 

In terms of sales volumes, the Illawarra region also saw the highest change in volume, surging 14.0 per cent over the year, followed by the Southern Highlands and Shoalhaven, up 12.7 per cent. 

Melbourne and regional VIC

Houses
$781,888
Monthly change: -1.4%
Units
$562,780
Monthly change: -0.8%

Melbourne’s property market has taken a hit over the month as the state implemented Stage 4 lockdown. The nation’s second largest city led price declines with a tumble of 1.2 per cent in August. 

Mr Lawless says that this result is expected as the performance of housing markets are intrinsically linked with the extent of social distancing policies and border closures. 

“It’s not surprising to see Melbourne as the weakest housing market considering the extent of the virus outbreak, and subsequent restrictions, which have weakened the economic performance of Victoria.” Mr Lawless said. 

Although Melbourne property values have now fallen 4.6 per cent since the start of the pandemic, values are still in positive territory over the longer term with prices up 5.9 per cent annually.

The more affordable segment of the market continues to fare better than the upper quartile due to increased first-home buyer demand boosted by government incentives. Over the month, the more affordable housing segment declined 0.6 per cent compared to a 1.9 per cent fall in the most expensive quartile. 

Current stage 4 restrictions in metropolitan Melbourne are scheduled to end on September 13. Premier Daniel Andrews is set to announce a roadmap out of stage 4 lockdown and stage 3 stay-at-home orders on Sunday the 6th of September.

Regional VIC property prices

Houses
$417,273
Monthly change: -0.5%
Units
$289,248
Monthly change: -0.6%

Over August, regional victoria property prices trended down 0.5 per cent to a median of $393,569. 

Both regional house and unit values slumped over the month with regional houses reporting a 0.5 per cent decline, and units sliding 0.6 per cent. 

According to the latest CoreLogic Quarterly Regional Market Update, the quickest selling region for houses around the country was Ballarat - taking around 30 days to secure a sale. 

Ballarat also offered the lowest vendor discounting of all the regions at -2.4 per cent. 

Regional properties outside Melbourne have been in high demand due to the rising trend in buyers looking for a lifestyle change. One property in Traralgon was on the market for just 24 hours before selling $17,000 over the asking price. 

Read: Real estate and Covid-19 in Victoria: FAQs 

Brisbane and regional QLD

Houses
$557,969
Monthly change: 0.0%
Units
$387,672
Monthly change: -0.3%

Over August, the rate of decline for Brisbane property values eased with properties down 0.1 per cent to a median of $503,128. Over the past three months, prices have fallen a little further at 0.9 per cent, however over the past 12 months, home values are still in positive territory, up 3.5 per cent. 

Founder and CEO of Metropole Property Strategists, Michael Yardney says that the Queensland property market looks to be relatively well-placed in terms of fundamentals, barring the high exposure of parts of the state to the troubled international tourism sector. 

“Compared to New South Wales and Victoria, Queensland is less exposed to foreign education in migration flows.

“Property prices have been relatively resilient, slipping less than 1 per cent since the Coronavirus pandemic hit,” he said. 

Another factor that has supported Brisbane property prices is increased interstate demand. 

CEO of the Real Estate Institute of Victoria, Antonia Mercorella says that as working remotely becomes the “new normal,” more people are relocating from major metropolitan areas such as Sydney and Melbourne. 

“As a result, interstate demand continues to strengthen in Queensland with the main draw cards being affordability, liveability and the lifestyle on offer.” 

“We anticipate this demand to surge in the coming year ahead as we navigate through to the other side of the pandemic,” she said. 

Regional QLD property prices

Houses
$392,358
Monthly change: +02%
Units
$359,808
Monthly change: -0.8%

In regional QLD, property prices remained unchanged to a median of $383,077. 

Regional houses posted a 0.2 per cent increase over August to a median value of $392,358. 

Regional units on the other hand posted a 0.8 per cent decline over the month. Over the year however, unit prices are still 3.0 per cent higher annually. 

Three property experts recently told REA that their pick for property growth is Townsville. 

Simon Pressley said that the local property market started to gain momentum in mid-2019 and has continued throughout 2020. 

“From the recently developed Cowboys NRL stadium, to new hotels, expansions of university and port infrastructure, a few major renewable energy projects and an expanding manufacturing sector, there’s a lot happening in Townsville,” he said. 

According to the latest CoreLogic Quarterly Regional Market Update, the best performing regional area in QLD is the Gold coast with an increase of 8.6 per cent in house values followed by the Sunshine Coast with a 8.1 per cent increase. 

Hobart and regional TAS

Houses
$517,877
Monthly change: +0.3%
Units
$400,578
Monthly change: -0.7%

Over August, declines in Hobart property values have been mild at 0.1 per cent to a median of $490,743. 

Hobart houses have fared better than units, posting a 0.3 per cent increase over the month to $517,877. Hobart units on the other hand posted a 0.7 per cent decline over August to a median value of $400,578. 

Annually, both house and unit values are still higher than they were the same time last year with houses and units up 5.8 per cent and 4.4 per cent respectively. 

Regional TAS property prices

Houses
$338,964
Monthly change: +0.3%
Units
$261,212
Monthly change: -2.5%

Over August, regional Tasmanian property prices remained unchanged. The median price of a property currently sits at $325,534. 

Regional Tasmanian houses were up 0.3 per cent over the month to a median of $338,964. According to CoreLogic’s data, over the past 12 months, regional Tasmanian houses are the best performing of all regional areas in Australia with price growth at 9.4 per cent.

Regional Tasmanian units however declined 2.5 per cent in value. However, annually, regional unit prices are still one of the top performing market sectors in the country, posting double digit growth of 13.9 per cent.  

According to the latest CoreLogic Quarterly Regional Market Update, the best performing regional market for units around the country is Launceston and the North East region of Tasmania - recording an annual house growth rate of 14.8 per cent in July 2020. 

Units across Launceston and the North East region also sold quicker than any other region with the median time on market sitting at 26 days. 

Canberra and the ACT

Houses
$716,400
Monthly change: +0.5%
Units
$450,757
Monthly change: +0.5%

Over the month, Canberra was the best performing capital city posting a 0.5 per cent rise in property values. Annually, Canberra has had the second highest growth after Sydney at 6.9 per cent. The current median price for a property is $636,324. 

With many states around the country experiencing price declines, the Canberra property market is bucking the trend with prices actually increasing 1.3 per cent since the onset of the pandemic in March. 

What has caused prices to go up? Total stock levels of property for sale in the ACT is currently at a five-year low. The low supply coupled with the current high demand has resulted in properties being sold quickly and many above market value as buyers compete for properties. 

“The most resilient market has definitely been the ACT,” CoreLogic’s Ms Owens told the ABC. 

“Jobs have been relatively stable in higher paid sectors and in the public and safety and administration sector employment has declined less than one per cent,” she said.

Adelaide and regional SA

Houses
$480,972
Monthly change: 0.0%
Units
$331,334
Monthly change: +0.3%

Adelaide property prices remained unchanged over August with the median price of a property $444,021. Looking over three months, property growth has decreased 0.1 per cent in Adelaide but has increased 2.7 per cent over the past year. 

Eliza Owen told Property Observer that Adelaide has always been a market that does not experience the price fluctuations of markets like Sydney and Victoria. 

“Adelaide is a relatively steady market that has traditionally not seen volatile movements in response to negative economic shocks.” 

“This may be partly due to the relatively low level of investment activity across the market. CoreLogic estimates that the portion of dwellings across Adelaide that were owned by investors as of July 2020 was 28.9% compared with 34.5% nationally,” she said. 

Regional SA property prices

Houses
$253,302
Monthly change: -0.4%
Units
$188,893
Monthly change: +3.8%

Regional SA declined a mild 0.1 per cent over August bringing the median price of a property to $244,950.

Regional SA houses reported a 0.4 per cent decline over the month to a median of $253,302. 

Regional SA units on the other hand were a top performer, increasing 3.8 per cent in value. Annually, units are an impressive 15.8 per cent higher than they were a year ago. 

Perth and regional WA

Houses
$461,891
Monthly change: 0.0%
Units
$350,394
Monthly change: -0.8%

Over August, Perth values were stable, recording no growth or loss. This is a significant improvement from the 0.6 per cent decline in July.

Over the past three months however, prices are down 1.6 per cent and on an annual basis, around 2.0 per cent lower than they were last year. 

According to the Real Estate Institute of Western market snapshot ending 30 August 2020, sales activity in Perth increased 2 per cent with REIWA members reporting 838 transactions. 

REIWA President Damian Collins also notes that a strong demand in the rental market has continued in August where it took a median of 21 days to lease a property in Greater Perth - 13 days less than the same time last year. 

“Maddington was the fastest suburb to lease in August, taking a median seven days to lease, which was closely followed by Armadale with nine days, Coolbelllup and Wanneroo with 10 days, and Secret Harbour with 11 days,” Mr Collins said. 

Regional WA property prices

Houses
$313,781
Monthly change: -1.6%
Units
$184,996
Monthly change: +1.6%

Over the month, regional WA properties posted the highest decline of all the state regions, falling 1.4 per cent. Month-on-month, the rate of decline in August has more than halved in comparison to the 3.2 per cent falls recorded in July. 

Over the year, Regional WA properties are around 8.7 per cent lower bringing the median value to $302,473. 

Darwin and regional NT

Houses
$476,143
Monthly change: +1.1%
Units
$277,551
Monthly change: +0.7%

Over August, Darwin was a best performer for capital cities posting a 1.0 per cent rise in values. The median price of a property is currently sitting at $393,386. 

Houses and Units both performed well over the month with houses posting an impressive 1.1 per cent growth while units climbed a 0.7 per cent.

Regional NT property prices

Houses
$398,396
Monthly change: -1.1%
Units
$ n/a
Monthly change: n/a

In regional NT, house prices fell 1.1 per cent over the month, remained unchanged over the past three months and down 3.3 per cent over the past year. 

No data was available for regional NT units. 

Rents and rental yields

Weaker rental conditions across the unit sector can be attributed to a combination of high supply and low demand.

Since the end of March, capital city house rents are down a modest 0.3 percent, while unit rents have fallen a more significant 3.5 per cent. The highest declines are recorded in Hobart (-5.1 per cent) followed by Melbourne (-4.4 per cent) and Sydney (-4.2 per cent). 

According to Mr Lawless, weaker rental conditions across the unit sector can be attributed to a combination of high supply and low demand.

“Supply levels for rental-grade units have surged over recent years, especially in Sydney and Melbourne, where high-rise unit supply across key inner city markets has remained substantially above average. 

“At the end of March there remained around 51,000 units under construction across NSW (+19% on the ten year average), and about 45,000 units were under construction across Victoria (+24% above the decade average).

“On the demand side, rental demand for inner city apartments has been significantly impacted by stalled overseas migration, including foreign students, as well as less demand from domestic students who are generally studying from home. 

“Rental demand has also been impacted by weak labour market conditions across industry sectors common with renters, including the food, accommodation, arts and recreational services sectors,” he said. 

Over to our best performers, the three capital cities that gained a positive change in rents for houses were Perth (2.1 per cent), Darwin (1.1 per cent) and Adelaide (0.7 per cent). 

For units, Perth and Darwin recorded the only positive growth of all the capital cities with an increase of 0.9 per cent and 0.5 per cent respectively. 

In our regional markets, all regional areas had a positive change in rents for houses except for regional NT (-1.7 per cent). Regional SA was a stand out with a 4.2 per cent increase. 

For units, all regions either had rents unchanged or posting increases. The top performer was regional WA with 2.5 per cent rise. 

The current national rental yield sits at 3.7 per cent for houses and 4.1 per cent for units. 

What does this mean for the Australian property market? What is the outlook for the months ahead?

The RBA's decision to hold interest rates will provide stability to consumers and support for the property market

While national prices have seen declines over the past few months, house prices are still holding up considerably well with a fall of just 2 per cent nationally in the June quarter according to the Domain house price report. 

ANZ Bank has maintained its forecast for property prices to fall by 10 per cent from peak to trough but now tips for smaller falls in Hobart, Brisbane, Adelaide, Perth and Canberra. 

The bank predicts the biggest declines in Melbourne (15 per cent) followed by Sydney (13 per cent), Darwin (9 per cent), Hobart (8 per cent)and Brisbane (6 per cent), Canberra, Adelaide and Perth are expected to outperform the larger capitals with smaller falls of 2 per cent, 3 per cent and 4 per cent, respectively. 

 “The smaller states are going to lead Australia’s economic recovery and that they’re less exposed to the impact of the closure of international borders.”

HSBC Economist Paul Bloxham holds a similar view, telling Domain that “As a broad principle, the smaller states are going to lead Australia’s economic recovery and that they’re less exposed to the impact of the closure of international borders.”

The RBA’s decision to hold interest rates at 0.25 per cent will provide stability to consumers and overall support for the property market.

As the performance of the housing markets are intrinsically linked with consumer sentiment, a rise in confidence will ultimately result in an increase in transactions as more people buy and sell. 

Mr Lawless concludes that there has so far been no evidence of large volumes of distressed properties on the market, however this could change as fiscal support tapers towards the end of the year and into next year. 

The federal budget to be announced on October 6th should help to provide further guidance on the direction of the housing markets as additional policy measures aimed at stimulating housing activity could help to support the economic recovery. 

What does this data mean for you?

Remember that while data can be insightful, you need to take any high level numbers with a grain of salt. It’s really important to do local research if you are looking to buy or sell. While high level indices give a great snapshot of what is happening nationally, in capital city markets and regionally, they don’t give great insight into what is happening at the post code level.

Market conditions will vary from suburb to suburb, and the value of your home is not only impacted by location, but also by property type and price point. While there may have been price drops in your city, there are still markets within cities where performance is above average. 

Maintaining perspective is important too. If price drops have been a reality in your suburb over the past couple of months, look at values over the past year. In many cases, home owners are still ahead when it comes to value growth.

We need to remember that a city like Sydney, Melbourne or Brisbane is a very big place, filled with a huge cross-section of different markets, as well as markets within markets, so a high-level data point about sliding property values should be dissected with a degree of scrutiny.

For advice around the biggest market indicators that impact price growth, you can download this helpful guide.

 

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