Values Show Remarkable Resilience
As anybody hunting for a new home will tell you, COVID-19 restrictions and a reluctance - amongst homeowners - to test the market have made the task of buying very difficult in recent months. In fact, the number of homes for sale nationally reached historic lows in early May, but it looks like the situation is about to improve for buyers as we head into winter.
The number of homes for sale rose 8.1% last month and sales activity has increased by 18.5%. Consecutively, the ANZ Roy Morgan index shows consumer sentiment has risen 42% from its March’s lows. That being the case and with governments now easing restrictions nationally, the number of homes flowing onto the market looks set to rise.
According to CoreLogic, despite a 0.4% decline in home values in May, house prices have been remarkably resilient to the COVID-19 pandemic and remain 8.3% higher than a year ago. Across the First National Real Estate network, members report strong attendances at open homes, substantial interest from first home buyers, and buyer willingness to transact. The apparent success of the Australian Government’s response to COVID-19 combined with other indicators suggests a return to more normal conditions is possible this spring.
Monthly change in capital city home values
|Sydney||▼ 0.4 %||▲ 14.3%|
|Melbourne||▼ 0.9%||▲ 11.7%|
|Brisbane||▼ 0.1%||▲ 4.3%|
|Adelaide||▲ 0.4%||▲ 1.8%|
|Perth||▼ 0.6%||▼ 2.1%|
|Hobart||▲ 0.8%||▲ 6.2%|
|Darwin||▼ 1.6%||▼ 2.6%|
|Canberra||▲ 0.5%||▲ 5.1%|
|National||▼ 0.4%||▲ 8.3%|
Market ‘resilient to a material correction’
CoreLogic head of research, Tim Lawless, says ‘Considering the weak economic conditions associated with the pandemic, a fall of less than half a percent in housing values over the month shows the market has remained resilient to a material correction. With restrictive policies being progressively lifted or relaxed, the downwards trajectory of housing values could be milder than first expected.’
Mortgage arrears remain static and although some 400,000 Australians have taken the opportunity to defer or pause repayments, recent history implies most home owners have some level of buffer to protect against negative equity.
As indicated earlier, national home values are 8.1% above where they were 12 months ago. In fact, only two capital cities – Perth (-2.1%) and Darwin (-2.6%) - have values lower than this time last year.
Regional markets hold firm while capitals weaken marginally
Throughout May, regional markets resisted reductions in values although momentum did slow. The strength of regions in recent years is now more than a ‘trend’ as Australians take advantage of areas with strong employment prospects and lower entry prices.
Hobart, Canberra and Adelaide were the star performers of May, with values increasing +0.8%, +0.5% and +0.4% respectively. Melbourne, Perth, Sydney, Brisbane and Darwin all posted marginal falls, however, these were adversely skewed by the most expensive market quartiles in Melbourne and Sydney, where values came off 1.3% and 0.6% respectively. That compares to falls of 0.6% in Melbourne’s mid-market and 0.3% in the most affordable quartile versus (-0.6%) and an actual rise of 0.1% in Sydney’s most affordable quartile.