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With Sydney still stuck in lockdown for a while yet, and Melbourne emerging from its own, there’s plenty of ramifications set to hit the property market — but it may not be in ways that we expect, according to an economist.
Speaking on a recent episode of The WIRE, CoreLogic’s head of research, Eliza Owen, revealed there are elements of real estate that can assist in determining the impacts of lockdowns on Australia’s biggest property markets.
Here’s what she had to say:
Auctions
As expected, the extended lockdown in Sydney led to lower auction volumes, but the real estate sector has been observed to have adapted to the situation much faster this time around, according to Ms Owen.
This means more deals getting done prior to auction, less properties passed in and more online bids.
“I do think agents became a little more discerning about the auction campaigns they think are going to work in lockdown conditions,” Ms Owen noted.
“There’s really a lot of adaptability reflected in the auction results.”
Melbourne particularly had proven it could carry a bit more strength going into its fifth lockdown, Ms Owen said.
While previous lockdowns resulted in subdued activity and a peak-to-trough decline in property values, particularly across the Melbourne metropolitan area, the capital city has had the time to make a full recovery before it entered into its latest lockdown, according to her.
Even though that lockdown would have slowed down transaction activity, clearance rates are still likely to improve off the backend, as “circuit-breaker lockdowns — short, sharp lockdowns — don’t really have much of an impact on the auction market or the broader market at all”.
“Ultimately, the market has seen a period of catch-up coming out of lockdowns,” Ms Owen highlighted.
Demand and supply
While the auction market seems to be getting the hang of the “new normal”, the rest of the property market appears to be having a harder time.
According to Ms Owen, with many people having the chance to recalibrate their finances following the intensive national lockdowns last year, properties are now selling faster than ever before, so much so that supply is barely keeping up.
But finances are only the tip of the iceberg.
The lack of mobility has also put a strain on supply, thus contributing to the imbalance between supply and demand, she said.
Ms Owen explained: “In any given year, you’d have a migration pattern where some people would leave cities to go to the regions, and others would leave the regions to go to cities. For obvious reasons, that didn’t happen during 2020.
“That meant that you didn’t get the same rental listings coming onto the market and you didn’t get the same for sale listings that come as a consequence of that migration. So, stock levels were completely subdued.”
While new listings have started to improve in 2021, they were just about the same average level they have been for the past five years.
With low interest rates and government incentives pushing more buyers into the market, particularly first home buyers, demand still far outweighs supply.
“First Home Loan Deposit Scheme, HomeBuilder, New Home Loan Deposit, stamp duty discounts — those are all tapping into the first home buyer cohort at a time when your typical first home buyer is aged between 25 and 34, which make[s] up the largest adult population cohort in the country,” she said.
“[That’s an] enormous pool of demand, with purchasing decisions triggered earlier than we would have seen otherwise.”
Highlighting the unusually rapid rate of increase in sales against new listings, Ms Owen revealed that “there’s actually more than one sale occurring for each new listing with the market”.
In fact, in the three months to June 2021, there were 170,000 sales recorded but only 130,000 new listings brought to the market.
“It is a supply issue that has exacerbated price gains,” the researcher conceded.
Looking ahead, Ms Owen believes it would likely be the gradual end or the decrease of incentives that could assist in ultimately regaining the balance between supply and demand.
Listen to the entire conversation with Eliza Owen here.
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