2020 has been a year marred by unknowns. Bushfires, floods, a global pandemic, and now the first Australian recession in 30 years. All things considered, for the most part, the property market is still faring relatively well.
For some, Covid-19 isn’t stopping them from selling or buying property. For others, they’ve opted to sit on the sidelines and wait for the storm to pass. But, how long will the storm last, and if you were to sell now, would you still get the price you want?
At the end of the day, it’s important to note that every postcode is different, and while some areas are suffering, others are booming. Because of this, we’d encourage you to really get into the detail and do your research.
We’ve pulled together a guide on the data and trends you need to watch to understand how your local market is performing. In addition, it’s never a bad idea to have a no-obligation chat with top local agents about what they’re seeing in your market.
At a more general level, there are some signs that selling now rather than later could be a good option, given that the future is still full of many unknowns.
Lower than average listings means that sellers currently face less competition
At a national level, year-on-year listings are lower, but is that necessarily a bad thing for sellers? One of the positive outcomes of lower listings is that in many areas, buyer demand has outstripped supply - which means that housing values have largely avoided huge price declines.
Last month CoreLogic’s Head of Research, Tim Lawless, noted that while housing stock has been lower than average, there is still a strong rate of absorption, which indicates that buyers are still on the market for homes.
Buyer demand is strong
According to Property Research Analyst Cameron Kusher from realestate.com.au, demand for property is at record highs.
He noted in a recent article that there’s never been more people actively looking for properties for sale, and that high-intent search behaviour on the platform is substantially higher than the same time last year.
This matches what we are hearing from agents we speak to around the country. Whether it’s an agent in Inner Sydney, the Gold Coast, Melbourne, Wollongong, Bunbury or Geelong, we’re hearing the same story: that buyer demand is still very high.
When we spoke to Gold Coast Real Estate Agent Matt Micallef last month, he said that “supply and demand here on the coast is quite unbalanced at the moment, so it’s definitely a seller’s market. There is just not enough stock to keep up with demand.”
Similarly, agents servicing Sydney’s Inner West and Hawkesbury region have also reported increasing demand.
First home buyers in particular have been encouraged by government concessions and incentives, as well as early access to superannuation which is fuelling demand for property within more affordable price brackets.
Consumer confidence is rising
It’s not just anecdotal reports about buyer demand that we pay attention to, the latest data from Westpac-Melbourne Institute of Consumer Sentiment also supports that this is true.
The report includes a ‘time to buy a dwelling’ measure, which has increased by 10.6 per cent to its highest level since September 2019. According to Westpac, confidence in the housing market has boomed.
According to Westpac, confidence in the housing market has boomed.
House price expectations along with home-buying confidence have both risen strongly. And interestingly, sentiment towards the real estate market in Victoria has also climbed, despite the state being subject to a second wave and strict lockdowns.
Despite a recession, in September property prices actually rose in six Australian capital cities. While Sydney still suffered from an overall -0.3 per cent decline, the rate of decline has slowed significantly. In addition, housing values in regional Australia have once again outperformed capital cities.
These are good signs that Australians are feeling more confident about buying and selling property.
Record-low interest rates
One of the biggest factors driving buyer activity is record low interest rates, which are historically the lowest they have ever been, sitting at around 2.3 per cent.
And buyers are snapping these rates up with enthusiasm. In August the value of all housing-related lending rose by a massive 12.6 per cent.
The Reserve Bank of Australia recently noted that in line with their commitment to support jobs, incomes and businesses across the country, they need to ensure that funding costs remain low and that supply of credit to households and businesses remain strong. They say this approach will be maintained as long as it’s required.
As it stands, an increase won’t be on the horizon until significant progress is made towards their full employment and until they are confident that inflation will be sustainably within the 2-3 per cent band.
But, will things get worse?
Potentially. While we’ve largely avoided the doomsday predictions of home values dipping by 30 per cent, the mild price declines we have experienced since the start of the pandemic might not be over yet.
Matthew Peter, QIC Economist recently told the Australian Financial Review that house price falls will be largely cushioned by low interest rates, pent-up demand from buyers and a recovering economy, believing that total price declines will be in the region of 5-10 per cent.
He believes that its the high-density apartment markets in Sydney and Melbourne that are most susceptible. He says they will suffer declines in excess of 10 per cent due to slower recovery in international student and permanent migrant numbers.
The other threat to the market would be a large surge of distressed sellers. So far there hasn’t been any evidence of en masse urgent or distressed listings hitting the market.
However, this could drastically change, especially as mortgage repayment holidays come to an end, as fiscal support tightens, and if the unemployment rate rises.
At the moment, the unemployment rate is sitting at 7.4 per cent, with the Federal Treasury noting that it could hit north of 10 per cent by Christmas.
As Mr Lawless noted in September’s CoreLogic Home Value Index, “If we do see active listing numbers rising to be higher than previous years, it could signal that vendors will need to offer up greater discounts in order to sell their home.”
“If we do see active listing numbers rising to be higher than previous years, it could signal that vendors will need to offer up greater discounts in order to sell their home,” said CoreLogic's Tim Lawless
And it’s clear that vendor discounting is definitely a situation that sellers would hope to avoid.
Choosing to sell is always a hard decision
Selling a home is one of the biggest financial decisions you’ll ever make, and you should always weigh up all your options before doing so - especially in the current economic climate.
But if your income has been affected by Covid-19, or you’re simply looking to make a move, choosing to sell your home now versus waiting to see how the market pans out could prevent pain in the long-term.
We’ve seen how unpredictable 2020 has been so far, so there is no guarantee that current market conditions will continue on a positive trajectory into the future.