In this post you will see an overview of
Tim Lawless from CoreLogic to show us in real figures what actually happened and where are we sitting under the current circumstances.
But first for those that don't know who Tim Lawless is: He is one of Australia’s leading property market analysts and commentators by business and the media.
As the founder of the CoreLogic Australian research division (formerly RP Data), Tim’s expertise across property markets has positioned him as one of the country’s most experienced and popular property market analysts and commentators. His knowledge and expertise is sought after by myriad government entities and regulators as well as national and international corporate entities operating across property, banking and financial sectors.
Nationally, housing market values did not see the large decline anticipated at the start of the COVID-19 pandemic.
Though performance was mixed across the state and territories, the national housing market had seen a -0.8% decline in the June quarter, which deepened to -1.7% in the three months to August.
However, in recent months the housing market has seen a trend toward a recovery in values.
In the three months to November, dwelling values had risen 1.1%, recovering over half the value that had been initially lost to COVID19.
National dwelling values are now just 1.2% below the record high value reached in October 2017.
Moreover, the recovery trend is now more broad-based.
In the month of November, the Melbourne dwelling market saw an increase in values of 0.7% following 5 months of consecutive decline.
Sydney and Melbourne appear to be the dwelling markets most impacted by COVID-19.
Though values rose across both these cities in the month of November, values are sitting at around 2017 levels.
Meanwhile, the Brisbane, Adelaide, ACT and Hobart dwelling values are now at a record high.
Darwin and Perth dwelling values remain -27.4% and 20.7% below peak values respectively, but are in a clear upswing trend following a long property market correction.
Regional Australian dwelling markets continued to outperform, with particularly low stock levels placing upward pressure on values during a time of rising demand.
There are numerous factors which have prevented a larger downturn in dwelling values, which are explored throughout this report. These include the institutional, coordinated response to the pandemic, which have seen low borrowing costs, added incentives for first home buyers and the extension of mortgage repayment deferrals limiting forced sales.
The nature of the COVID19 downturn has also had a more acute impact on the rental market than purchase values. Additionally, there is a broader economic recovery evident as COVID-19 remains well contained across the country, and hopes for effective vaccines emerge.
As the continued economic recovery converges with highly accommodative monetary and fiscal policy, demand for housing is expected to remain strong in the near term.
However, pockets of risk remain for inner city Sydney and Melbourne dwelling markets.
The recession was not as steep as anticipated
However, the contraction in GDP over the first half of 2020 was not as steep as first expected at the onset of the pandemic. By the September quarter, a 3.3% increase in GDP suggested around 40% of the decline had been recovered. Other indicators have suggested a faster-than-expected economic recovery:
- After the number of people employed fell by 643,700 in the June quarter, total people employed rebounded by 420,646 by the end of October.
- Retail spending declined 17.7% from March to April, then rose 17.6% from April through to September.
- The Performance of Manufacturing Index (PMI) plunged 33% over April, but by October had climbed above 50.
A PMI of over 50 suggests expansion of manufacturing activity, and the October result marked expanding factory conditions for the first time since July.
The monthly Westpac-Melbourne Institute consumer sentiment index bottomed out at 75.6 in April, and dipped again through the second wave of restrictions in the September quarter. However, sentiment has since surged to 107.7 in November. Overall, the Australian economy is showing strong signs of recovery from what was ultimately a manufactured downturn in response to a health crisis.
Similarly, COVID-19 poses lasting challenges to employment conditions, particularly as businesses have been forced to become less liquid and labour-intensive through the pandemic. This could hinder economic demand in the long term. Further headwinds for the Australian economy in the short term include renewed cases of COVID-19 until the successful distribution of a vaccine.
Another round of strict restrictions would further disrupt Australia’s economic recovery. An additional risk is escalating trade tensions with China, which accounted for around a third of Australian export values in 2019.
Conditions in the housing market do not currently reflect these downside risks, as Australian dwelling values rose through October and November. Indeed, the upswing in housing may contribute to the economic recovery through wealth effects and increased transaction activity.
At the end of the day people that will take action and risk buying assets will always be in a different position of those that are always waiting for the perfect time to act. There is no such thing as perfect time but simply the right time for you.
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