The number-crunchers here at OpenCorp love nothing more than cold hard facts that, when pieced together, tell a story.
We’ve been looking at the data and the story we’re seeing currently suggests to us that the property market in Australia is heating up.
Consider these facts:
- 6 of the 8 capital cities went up in value in September, 2020, while the rate of decline in Sydney and Melbourne is now only $250 per day on a million dollar property
- Banks and mortgage brokers report massive spikes in home loan pre-approvals, indicating that the best time to buy is when you can afford to buy; pre-approval rates haven’t been this high since 2014.
- Search activity on realestate.com.au is 24.5% higher than this time last year when there was no pandemic. This tells us that people are combing the market, waiting for sellers to list.
- The Melbourne market, the city most affected by COVID-19, has fallen only 5.5% since the beginning of its first lockdown. The media headlines were loud and swift, with some outrageous predictions that the market would fall by up to 30%. We asserted early in the piece that these predictions were ridiculous, and that falls of that number would not occur at the affordable end of the market where we invest. Our assertions weren’t made rashly, but were backed up with logic and reason … and data!
Our good friend Tim Lawless from CoreLogic yet again hits the nail on the head when he says, “low mortgage rates, and the prospect that rates could fall further, low inventory levels, government incentives and improving consumer sentiment seems to be outweighing the negative economic shock brought about by the pandemic”
Throw in the announcement from the Federal Treasurer, Josh Frydenberg, that gives banks the ‘green light’ to make it easier to lend to people in early 2021, and the indications are becoming pretty clear: anyone in the position to invest, should invest, and invest now.
But let’s peruse the numbers again …
- Nationwide all dwellings fell 0.1% in September, indicating that the rate of decline is easing.
- 6 of the 8 capital cities actually experienced a rise in dwelling values.
- Melbourne, the city most affected by COVID-19, fell 0.9% for the month across all dwellings (0.9% decline in houses versus 0.8% decline in units), so the rate of decline is falling compared to prior months.
- Since peaking in March, 2020, Melbourne values have fallen 5.5% in total, so the decline has effectively been half the size of the falls experienced during the APRA downturn when the screws on lending were tightened.
- With COVID-19 restrictions starting to lift and private home inspections once again permitted, expect to see activity in Melbourne lift in October.
- Sydney fell 0.3% in September (0.2% decline in houses), so the rate of decline is falling in Sydney as well.
- Sydney has consistently enjoyed 70%+ clearance rates on strong listing volumes in recent times, suggesting that Sydney may have also bottomed out.
- Brisbane enjoyed a 0.5% increase for the month.
- An RBA speech last week from the Deputy Governor spoke to “our policy should err on the side of overstimulating rather than under stimulating”.
- When you combine that with the expectation of an official rate drop next Tuesday to 0.1%, there’s a lot to like about 2021 and beyond once COVID is neutralised in Melbourne and other capital cities.
And this, from Tim Lawless:
“We aren’t seeing any signs of a rise in distressed listings or stock starting to pile up in the market. In fact, the opposite seems to be true, where new listings are being absorbed by the market faster than the rate at which they are being added.”
And finally, in the rental market, there is a clear divergence taking place between houses and units, especially in Sydney and Melbourne.
As investors, we need to constantly be looking at the numbers to see what patterns are emerging and whether or not that spells opportunities for us.
Our advice? Don’t take notice of the mainstream media headlines; instead, look at the stories behind the stories, and make informed decisions based on facts and data-driven trends.
If you’d like to more fully understand the current market situation and the opportunities to invest in property, please contact us today.
The full CoreLogic report can be found here.