As we move into the final quarter of 2020, the national property update for September looked a lot more positive, despite the fact that our two largest markets, Melbourne and Sydney, both recorded declines over the period.
Overall the mild -0.1 per cent decline in national dwelling values reported by CoreLogic can be attributed to declines in these two markets, which hold the lion’s share of housing stock and value. Look more closely and Melbourne’s market - struggling under stage 4 restrictions - was down -0.9 per cent over September - and the main drag on national values. Sydney, on the other hand, recorded a -0.3 per cent decline.
However, it’s not all bad news. Other capital cities, with the exception of Perth, were all up over the month, and are in positive territory for the quarter. Many smaller regional centres and cities in NSW also advanced over the month, a phenomenon that is being attributed to increased affordability and demand for more space as remote working looks to become the norm. In addition, many regional centres in NSW have not been significantly impacted by Covid-19.
Overall, listings and auction volumes are rising, and clearance rates across Sydney are noticeably improving, which is a reflection of increased consumer sentiment.
Understanding consumer sentiment
Consumer sentiment - a gauge of how Aussies are feeling about the state of the economy - is looking a lot more positive. Westpac’s Consumer Sentiment Index recorded a surge of 18 per cent from August to for September, a figure that is only marginally below the six month average up until March before the pandemic hit.
So why is this rising?
Despite the fact that Victoria has experienced an extended lockdown, the rest of the country has been relatively unscatthed by the virus. Government stimulus - in the form of income payments via Jobkeeper and JobSeeker has also been extended, which is providing some comfort and support to the Aussie public.
Performance of individual markets is also highly variable, with some suburbs reporting near record sales activity. Post-lockdown stock levels are still low in some postcodes, and this shortage of properties has stimulated competition amongst buyers, and boosted asking prices in the process.
Advertised stock levels are still low in some postcodes, and there is a shortage of properties which has stimulated competition amongst buyers, and boosted asking prices
Sydney market update
Overall the country’s largest property market dropped marginally -0.3 per cent over September, to finish -1.6 per cent for the quarter for a median dwelling value of $859,943.
Despite the challenging year so far this still leaves this market up +7.7 per cent for the year to date - and highlights the importance of perspective and the fact that property is a medium/long term investment.
The rate of decline in Sydney has also been easing since July, which could mean this market is primed for a turnaround sooner than many doomsdayers predicted.
The rate of decline in Sydney has also been easing since July, so this market could be primed for a turnaround sooner than many doomsdayers predicted
Units have dropped a little more than houses, recording a decline of half a percentage point (-0.5 per cent) for a median value of $743,288. Median house values across Sydney metro are still below the magic $1 million mark at $983,262 - having dropped -0.2 per cent since August.
Clearance rates are looking more promising, with CoreLogic reporting that Sydney volumes reached their highest level in the last week of September since early April.
Now let’s take a look at regional markets in NSW and analyse performance over the month.
Regional NSW market update
Regional markets across the country have been showing their metro cousins how to handle the challenges of a pandemic, with the majority of them out-performing them.
Dig into the data and this is very apparent, with CoreLogic’s combined regional index down -0.8 per cent since March, while capital cities have dropped by -2.6 per cent over the same timeframe.
Regional areas in NSW saw a rise in housing values over September, up +0.7 per cent for a median house price of $490,842. Units are a little softer, down marginally -0.1 per cent over the month for a median value of $411,748.
Overall regional NSW property values are still positive for the year to date, having grown +5.5 per cent over this timeframe.
Every regional area - with the exception of Western Australia - saw a rise in housing values over September, up +0.7 per cent nationally
There is also anecdotal evidence that there is a transition of demand to regional centres, especially those that are in striking distance - and commutable - to capital cities.
Reports from agents in regional NSW have confirmed this trend to us, with record prices achieved in the Hunter and Hawkesbury, where properties have been selling well above their reserve.
Looking at pre-Covid activity in the three months to March 2020, and then comparing it to the three months to September, CoreLogic has noted that days on market in regional NSW has fallen significantly.
Before Covid, homes in regional NSW were taking on average 65 days to sell. In the three months to September, homes sold at an average of 57 days, indicating that buyer demand in regional areas is rising.
Sydney and NSW rental market update
The rental market continues to face challenges, particularly in inner city locations as the shift to regional living and living with parents - however temporary - impacts vacancy rates.
Despite this SQM Research reports that the national residential rental vacancy rate of 2.0 per cent in August 2020 is actually lower than this time last year, when it was 2.2 per cent.
Sydney still has the highest vacancy rate in the country (3.5 per cent), though this has trended down by -0.1 per cent from July. The same is true of Sydney CBD, where vacancies have eased to 12.9 per cent in August from an all-time high of 16.2 per cent in May.
The rush to regional locations from the city is also clear to see in rental vacancy rates, with the Blue Mountains reporting a record low rental vacancy rate of 0.7 per cent in August.
What does this mean for the Sydney market and what can you expect in future?
So what are property analysts and commentators predicting for the near future for Sydney property?
According to leading economists at CommBank, home values will rebound strongly in 2021. However they stress that performance will vary significantly by location. They predict house prices to ‘decline at a modest pace’, bottoming out in the first quarter of 2021 - with a ‘solid recovery’ thereafter.
CoreLogic’s Head of Research Tim Lawless believes a combination of record low interest rates - with the prospect of further cuts, low inventory levels, government stimulus and steadily improving consumer sentiment could help negate the virus induced economic downturn.
He also points out that there are currently no signs of mortgage stress in the market, and the limited stock on the market is being bought at a fast rate - both positive signs in his eyes.
Property investor and forecaster Michael Yardney believes Australia has gotten off relatively lightly compared to many countries, and there is cause to be optimistic about the future.
He highlights the Reserve Bank’s positive projection that the economy will grow by 4 per cent in the year to June ‘21, and unemployment should ease from 10 per cent later this year to 8.5 per cent by the end of 2021.
The government has also just announced a fresh round of stimulus measures in the 2020 Budget, with tax cuts, incentives for employers to hire young job seekers as well as new and accelerated infrastructure projects to support the economy.
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 overall price drops Sydney, every suburb is different, and indeed some suburbs are showing strong performance in this market.
For advice around the biggest market indicators that impact price growth, you can download this helpful guide.