After a lengthy period of rapid price and sales growth, the Australian housing market sales rate in the spring has begun to grow more slowly. Home Sales fell 10% in August, new home listings are down and new dwelling construction approvals have dropped as well.
Credit tightening along with some Covid lockdowns has suppressed sales from June to August, even though mortgage rates continue to fall.
Home prices in Sydney, Perth, Melbourne and Brisbane continue to climb (see below) even as sales and listings diminish. The recent home price growth rate for Australia is very steep comparable to the record rates back in the late 1980s. Given foreign students and other immigrants coming in are well down due to lockdowns, it seems the market is still suppressed by the pandemic.
Sales Activity Still Well Above Long Term Averages
Australian home sales are still above the 30 year average despite the fact that listings have dropping severely. Yet, the spring season brings an awakening of the market. If Australians can contain the Covid Delta threat and launch vaccinations faster, this could be a strong summer sales season.
At 32% however, Australia is well behind other G7 countries in full vaccination. In the last month, 3 million more Australians received their second vaccine shots. Without a big push to vaccination, the vulnerability/lockdown issue will linger until next March. High density housing in Sydney and Melbourne will be affected.
With rent prices racing higher, interest from landlords and other investors should add to the new summer buying mix. See more rent stats below.
The home price and lower listings situation is no different from other countries such as the UK, US and Canada, where the pandemic has generated similar demand and migration patterns.
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The persistence of the Covid 19 threat is hampering Australias housing market more however, given Australias lower rate of full vaccination.
Corelogic’s August national property market report shows sales slowed and price rises slowed to their lowest rate since last January. Overall home prices rose 1.5%.
Australia Home Prices August 2021
Australia dwelling values 2021. Screenshot courtesy of Corelogic.com.au.
Home Prices Peaked in March
According to the housing stats, Australias real estate peaked in March, when home prices rose 2.85%. Home prices in Sydney rose 1.9% during August to a median value of $1,293,450, while Sydney apartment prices grew 1.4%% to an average of $825,514. Home prices in Melbourne rose 1.4% during August, and reached a new average of $954,496, while apartments rose .5 per cent to reach $615,909. Melbournes recovery was delayed and its price may moderate more with the new lockdown.
Corelogics Director Tim Lawless however says the moderation is due to home prices reaching too high, out of reach for most buyers. He said in the latest housing market report that “Housing prices have risen almost 11 times faster than wages growth over the past year, creating a more significant barrier to entry for those who don’t yet own a home.”
In fact, Australians are experiencing difficulty achieving down payments for a home since they need 135% of their annual gross income to raise just the 20% deposit.
Lawless acknowledges lockdowns have dampened consumer intent and falling listings. Price growth right now is still 3.6 timers higher than long term averages, so the full Australian housing market is very hot.
Here’s a brief visual look at how markets are trending (courtesy of Corelogic):
Change in Australian Dwelling values. Screenshot courtesy of Corelogic.com.au.
CoreLogic Housing Market Update Video
Home, house, apartment value price changes. Screenshot courtesy of Corelogic.com.au.
Heres a brief visual look at how markets are trending (courtesy of Corelogic):
Dwelling values in Australia, timeline history. Screenshot courtesy of Corelogic.com.au.
City by City, Australia Dwelling Value Changes August 2021
City by City Dwelling Price Change. Screenshot courtesy of Corelogic.com.au
Australia New Home Listings August Stats
New listings are a key indicator, and will contribute to higher upward price pressure. The price patterns is very similar to 2020 where lockdowns discouraged new listings and sales activities. New building permits approved have headed downward as well although are up from last year.
New dwelling listings in Australia. August 2021. Screenshot courtesy of Corelogic.com.au
Australia Housing Sales June. Screenshot courtesy of housingdata.gov.au.
Australian Rental Market Update
The rental market has been hampered by this months trends too with rent yields falling even while rent prices are rising.
Australian gross rent yields August 2021. Screenshot courtesy of Corelogic.com.au
Darwin, Perth, Hobart and Canberra are seeing continuous upward demand for rental properties.
Rent Prices Rising Across Australian Cities
Australian Rent Prices August 2021. Screenshot courtesy of Corelogic.com.au
Home and rent values by city. Screenshot courtesy of Corelogic.com.au.
Home Prices Forecasts for Australia
Commonwealth Bank forecasted that Australia’s house prices will rise 16% over the next two years in what theyre calling a housing market boom. CBs head of Australian economics Gareth Aird expects house prices will rise 9% in 2021 and 7% more in 2022.
Is this a House Price Bubble?
While housing markets in the UK, US and Germany are heading into boom periods, the suddenness of Australias demand for housing at the end of the usual buying season is remarkable. A number of factors are driving the surge, including fear of missing out.
The rises in prices are deeply affecting housing affordability, as ever-popular Australia is one of the least affordable countries in the world. Sydney, Melbourne, Brisbane, and Adelaide are all ranked in the top ten most expensive cities to live in. Urban fringe housing development limits are being cited for the fast-rising price challenges in these cities.
Home Prices in Australia 2021
And as buyers are able to take out home loans at such low mortgage rates, the competition for the limited supply of Australian homes is heating up.
New Home Loan Commitments Australia. Screenshot courtesy of www.abs.gov.au
Whats Causing the Rising Home Prices?
- continuing low mortgage rates
- economic recovery
- optimism, fear of missing out, euphoria
- Australias excellent response to Covid 19 transmission
- business reopening well, increasing optimism for the economy
- fewer homes for sale
- first time home buyers were coming back
Buyer demand is mostly being fueled by a surge in owner-occupiers rather than investors, looking to take advantage of historically low interest rates, generous government incentives and an increased state of normality.” said CoreLogic’s Head of Research Tim Lawless.
2022 Forecast Much Brighter
Previously, RBA was pessimistic about Melbourne home prices increasing (75%, 18/24), while one-third (29%, 7/24) expected the market to stagnate until 2022 or beyond. A lot of pessimistic views that are likely being revised right now as the buying season begins.
Price change for regions and cities for the past 12 months. Melbourne and Western Australia region have much further to come back from their pandemic lows.
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Housing trends are similar to what is seen in the US housing market and the UK property market, where the work at home mandate is allowing renters and homeowners in dense areas to move outward to the suburbs or towns where housing is available.
The strength of that outward tide tends to stemmed only by limited supply of housing outside the major cities.
Australian Consumer Sentiment Index
The latest Westpac-Melbourne Institute index consumer sentiment readings forecast growth of 3.5% for 2021, almost in line with the Westpac forecast of 4%. They predict population growth forecast to slow to 0.2% in 2021 compared to 1.5% in 2019, both forecasts represent significant above-trend growth. Of course, international restrictions are still in place till July.
Consumer confidence history timeline chart index. Screenshot courtesy of ANZ
Housing Price Forecast Australia to 2021
This is an older graph and shows ANZ may be underestimating the rise of Australias property sector. Revised estimates should available in the coming months.
Screenshot courtesy of macrobusiness.com.au
Rent Prices in Australia
Across Australia, gross rental yields have fallen from 3.72% last May to a new record low of 3.50%. The trend is stronger in Sydney dropped to 2.69% from 2.92% a year ago) and in Melbourne gross yields are averaging
2.87% (down from 3.18% a year ago).
Change in Australian rent prices. Screenshot courtesy of Corelogic.com.au
Annual Change in Rent Prices Across Australian Cities in April
Australian Rent Prices to August 2021. Screenshot courtesy of propertyupdate.com.au.
Nothing drives rental rates up more than a lack of vacancies. Rental vacancies have gone in opposite directions this year for Sydney and Melbourne. Rates in Sydney, Hobart, Darwin, Perth and Brisbane have dropped.
Unemployment Not as Bad as Forecasted During Pandemic
Australias treasury secretary Steven Kennedy revised previous forecasts of 10% unemployment by September, but is pulling that number back to 8%. Business and consumer confidence is returning. We are well ahead of where I imagined we would have been in March. said Mr. Kennedy in an AFR interview.
According to abs.gov.au/ausstats/, Australias seasonally adjusted estimate of employment increased by 114,700 people in July 2020, with:
- unemployed people up by 15,700 people;
- unemployment rate grew by only 0.1% to 7.5%;
- the underemployment rate fell 0.5 pts to 11.2%;
Employment had increased by 114,700 people (0.9%) between June and July 2020, with full-time employment increasing by 43,500 people and part-time employment increasing by 71,200 people. Compared to a year ago, there were 282,800 less people employed full-time and 131,700 fewer people employed part-time.
The temporary shutdown and reduction of farm and meat factory workers, along with construction workers in Victoria along with the unemploying of thousands of pre-school teachers/assistants are just some of the factors working against the housing and rental markets. A resurgence of Covid 19 in schools and out into their communities could be very damaging again to the economy.
The losses of about 230,000 foreign students is yet another factor weighing on the revenue side for Australia. If a covid vaccine is still a year off, it might be hard to be cheery about high-density apartments in Melbourne or Sydney.
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The longer the downturn continues, the more pressure Australian banks will experience with their 1.7$ trillion debt. That mortgage-related debt may be one of the highest in the world.
Will Australias Economy be Okay in 2021?
Australias economy was bolstered by widening trade surpluses as the countrys GDP grew to $1.89 Trillion in 2019. Yet lower commodity prices, reduced foreign investment, consumer debt trouble, and China trade scuffle is making a few experts warn of turbulence and a slowdown ahead.
more than 60% of bank loans in Australia are in residential properties, making it the highest proportion in developed countries and more than double compared to the US — from post in the Singapore Business Review
The 6 week shutdown of Victoria is having a sizable impact for the Australian economy and estimates for unemployment are rising. Cutbacks in jobless aid announced are making it tough for many to be able to afford rent payments.
Australian investors, landlords, and property managers will likely feel warm winds of more sales in 2020. Property managers will want to look into property management software platforms to help them drive even more profit from their portfolios.
Prices and rents here are much lower than Europe or North America. With remote work becoming more common around the world, immigration and tourism could boom once the Corona virus vaccines are distributed. Are Australian rent prices a concern? Lets take a look so you can determine the price/rent ratio and the ROI on buying Australian real estate.
For over-indebted Australian mortgage holders, it might be the end, but for savvy investors, 2019 might bring some outstanding buying opportunities for rental income property. With or without the negative gearing proposed by the labor party, experts suggest rental property investors can still come out ahead.
Prices Dropping Down Under
Compare the two charts below to see how prices have changed over the last months. Earlier this year, rent prices in Sydney dropped 8% overall while house price fell by 9.2%.
The general consensus is that Australias housing market has resumed its upward momentum during the last half of 2019, and is ready for solid growth in 2020.
Australia recorded its strongest trade surplus of all time in March. Its down slightly to AUD $8.8 billion.
As the above graphic shows, after 6 years of price growth of about 8% per year, prices began to fall in 2017. This chart doesnt show the precipitous drops of the last month. Fears of oversupply of housing will cause developers to cut back on development which decreases investment and tax revenue for governments and slows the economy. Real estate is big part of any economy including Australias and the loss becomes iterative.
Chart courtesy of ABS.gov.au
Up till now, the housing and economic outlook for Australia were strong:
Screen Capture courtesy of KPMG
Australia Rental Price Update
Apartment and house rents have taken a decided turn for the worse in late 2018 The rental markets of Sydney, Melbourne, and Brisbane, are showing strong downward motion. Rent prices are flat in Adelaide, Perth, Canberra, and Hobart. Housing market prices declined in Sydney, Melbourne and Perth, but rose in other cities.
Rent Price History and Gross Rent Yields
Australia Rent Price History and Gross Rent Yields. Screenshot courtesy of Corelogic.com.au
Australian city rent prices- sydney melbourne brisban perth adelaide. Screenshot courtesy of rent.com.au
Much of the Australian housing market predictions will be influenced by international trade, China imports, and Chinas access to its traditional export markets. Australias exports were in decline.
Predictions for Housing Markets in 2021
The housing markets did contract hard in the pandemic period across the globe.
The stubbornness of US President Trumps America First Policy and tariffs against China, the ripple effects will take their toll on the Australian economy in the years ahead. And Australia has its own issues with China which may impact exports to that country.
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Well keep you updated as Australias housing market progresses in 2020. Take a good look at the California housing predictions and the best cities to invest in to capture maximum yields.