Australia’s real estate market is splitting in half
Australia’s real estate market is powering up as we shift along the path out of lockdown. But an unusual trend has emerged that’s cracking the market in two.
Despite Australia not being out of the pandemic woods just yet, Australians are optimistic about the property market.
According to ME’s latest Quarterly Property Sentiment Report, Australians feel that the property market is on the mend. Conducted last month, the report showed that 38 per cent of people surveyed felt “positive” about the national housing market — a result sitting just 4 percentage points below the same report for October 2019, and a clear improvement on the 29 per cent positive sentiment in April 2020.
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When comparing sentiment between the start of the pandemic to now, less Australians are worried about the value of their property falling. By October, 49 per cent had concerns for their property value while in April, 64 per cent were worried.
The largest uptick in the report came from NSW metro residents, with 29 per cent of Sydneysiders feeling positive about the market in April, to 42 per cent by October.
Andrew Bartolo, ME’s head of home loans, said signs of optimism have grown throughout spring.
“This is really promising and indicates that despite volatility in the market, Australians have a resilient mindset when it comes to property,” he said.
The proof is in the numbers
In the latest ABS housing finance data, the volume of funds lent for the purchase of buying a home demonstrated that Australians were feeling pretty positive about property.
Volume increased by 5.9 per cent in September alone, taking the quarterly increase to 20 per cent – the highest quarterly growth rate on record. That change followed an understandable 10.9 per cent contraction in housing finance for the June quarter, when strict social distancing restrictions were in place.
“As with the strong bounce-back in many economic indicators over the September quarter, eased social distancing led to a rise in consumer sentiment and an increase in sales and listings volumes. CoreLogic estimates that sales volumes increased around 27.7 per cent in the quarter, despite renewed restrictions across Victoria,” said Eliza Owens, head of Australian research at CoreLogic.
A tale of a two-speed market
Although most property owners, or buyers, revealed they feel more confident about buying or selling property, there are two schools forming, according to the study.
A total of 57 per cent indicated they are in no rush and plan to delay any move until the COVID-19 situation “improves”, while 43 per cent indicated they are looking to buy or sell “as soon as possible”.
No doubt taking advantage of slower market conditions, first-home buyers turned out to be the most likely group to buy right now − up 7 percentage points since October 2019 to 53 per cent this year.
“Despite growing positivity and optimism for house prices, there are still many buyers and sellers who will be more comfortable continuing a ‘watch and see’ approach,” Mr Bartolo said.
Brad Teal, director of Melbourne-based agency Brad Teal Real Estate, said the lifting of restrictions has given buyers a new “energy”.
“Whether or not that energy continues, only time will tell, but at the moment, the market has got good energy. Our litmus test for that is the volume of email inquiries we’re getting off the major web portals,” he said.
Mr Teal added that while consumer confidence hadn’t necessarily returned to the inner city unit market, there were plenty of positive vibes running through suburban Melbourne.
“We’ve not seen any drop in prices, because there is low stock for good quality housing. There is a good supply of buyers, and therefore the old economics of demand and supply comes into the equation,” he said.
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Regional moves continue to grow in popularity
Working from home arrangements are continuing to influence more people to buy in regional areas according to the study.
By June this year, 68 per cent were sure buyers would head to the regions and by October that figure rose to 78 per cent. Even 50 per cent of respondents said they’d consider buying in a regional area themselves, up from 45 per cent last quarter.
And CoreLogic data appears to support the sentiment.
“The past two months have reversed the previous mild falls across the combined regional areas. In the seven months since March, regional dwelling values are up 1.7 per cent while values across the combined capitals index have fallen by 2.3 per cent,” said Tim Lawless, head of research at CoreLogic in the CoreLogic October home value indices.
“The new-found popularity of working from home is only one factor helping to support regional home prices. More affordable price points, lower densities and lifestyle factors, are also underpinning the relative strength across many regional areas of the country,” Mr Lawless added.