By Cameron Kusher, Executive Manager – Economic Research at REA Group
The residential property market ended 2020 with significant momentum, as a combination of strong housing demand and a low volume of stock resulted in increased sales and higher property prices. Properties are selling faster than they were 12 months ago and people are increasingly searching for more expensive properties than they were a year ago. Early in 2021 there is little to suggest any change in these market fundamentals, with demand reaching new record highs and supply remaining quite low.
The Governor of the Reserve Bank reiterated in early 2021 that he expects official interest rates to remain on hold for a number of years (out to 2024), which means that borrowing costs are expected to remain at historic lows, making borrowing for housing appealing.
The HomeBuilder stimulus remains in place until the end of March 2021 (at this stage) and it has led to unprecedented levels of enquiry to developers with projects listed on realestate.com.au. New house construction reached a record high in December 2020, and the Housing Industry Association (HIA) reports that new home sales had their second-best month on record in December 2020.
Mortgage-lending data also showed a record-high value of lending for December 2020, with investor, first home buyer and other owner-occupier loan commitments all increasing over the month.
While there were previously concerns about a mortgage deferral cliff, the latest data from the Australian Prudential Regulation Authority (APRA) for December 2020 showed that 2.4% of all mortgages were deferred, which is the lowest since April of last year and down from a peak of 11% in May 2020. This is not to say we may not see an increase in forced sales, especially as JobKeeper and JobSeeker are removed, but the volume of such sales is likely to be quite low.
Let’s delve into the data for each state and territory and see what it looks like currently.
Property prices have increased over the 12 months to January 2021 in Sydney (2.2%) and regional NSW (8.2%). Properties are also selling much quicker than they were a year ago, with days on site five days shorter than a year ago in Sydney and 20 days shorter in regional NSW.
Transaction volumes have also lifted relative to last year. Over the first six weeks of 2021, sales volumes were 23.0% higher than a year ago in Sydney and 26.8% higher in regional NSW.
Demand for properties for sale is at unprecedented levels, with views per listing across NSW 87.7% higher than a year ago. The outer regions of Sydney have recorded the largest increases in views per listing over the year, while regional NSW, Southern Highlands and Shoalhaven, along with the Central West, have seen the largest increases.
Following a tough 2020, the market is strengthening across Victoria. Despite the challenges, over the 12 months to January 2021, Melbourne dwelling prices were 1.8% higher and in regional Victoria prices have risen 8.8%. Properties in Melbourne are selling nine days quicker than they were a year ago, while in regional Victoria they are selling 18 days faster.
Transaction volumes are much higher than they were a year ago, with sales over the first six weeks this year 51.3% higher than the first six weeks of last year in Melbourne, and 28.3% higher in regional Victoria.
A lack of stock for sale remains a challenge, with demand at record highs, and for-sale views per listing across Victoria 70.5% higher than they were a year ago. Views per listing have generally recorded only moderate year-on-year growth in Melbourne over the year; however, it has more than doubled on the Mornington Peninsula, while in regional Victoria, Ballarat and Geelong are the only regions in which views per listing haven’t doubled over the year.
Property prices are on the rise again in Queensland, with prices increasing over the 12 months to January 2021 by 3.9% in Brisbane and by 6.7% in regional Queensland. Properties are also selling quicker, with the average days on site falling by 10 days year-on-year in Brisbane and by 12 days in regional Queensland.
Relative to the first six weeks of 2020, over the same period this year sales in Brisbane were 32.9% higher and in regional Queensland they were 38.7% higher. This highlights the strong level of demand for properties for sale.
While demand for properties is strong, a lack of supply has sent views per listing soaring, rising by 87.3% relative to a year ago across Queensland. The outer regions of Brisbane have typically recorded the largest year-on-year increases in views per listing, while in regional Queensland views per listing have doubled over the year in Central Queensland, Darling Downs-Maranoa, Outback, Sunshine Coast and Wide Bay.
Property prices in SA have risen over the past year, with prices in regional SA (5.7%) recording stronger growth than those in Adelaide (4.5%). The average days on site has fallen by nine days over the past year in Adelaide and by 14 days in regional SA.
Sales volumes are currently higher than they were a year ago, thanks to strong demand. Over the first six weeks of this year, Adelaide property sales were 20.5% higher than the corresponding period last year and in regional SA sales volumes were up 38.9%.
Over the past year, average views per listing have risen by 73.2% in SA. The southern suburbs of Adelaide have recorded the largest increases in views per listing, while in regional SA views per listing have more than doubled over the year in Barossa-Yorke-Mid North and South East.
There has been an increase in property prices over the 12 months to January 2021 in Perth (4.9%) and regional WA (7.4%), driven by increases in demand. This is also highlighted by the fact properties in Perth are selling 14 days faster than they were a year ago, and in regional WA they are selling six days faster.
To further highlight the improving WA housing market, sales volumes over the first six weeks of this year were 31.4% higher than over the same period last year in Perth and they were 67.3% higher across regional WA.
Further highlighting the strong demand is data that shows throughout WA, views per listing have risen by 72.5% year-on-year. In Greater Perth, Mandurah has seen the greatest increase in views per listing over the year, while Bunbury and the Wheat Belt in regional WA have seen views per listing more than double.
Property prices have shown strong growth over the past year in Tasmania, with Hobart prices 9.0% higher and prices up 9.5% in regional Tasmania. Properties in Hobart were selling one day faster in January 2021 compared to January 2020, while in regional Tasmania they were selling 16 days quicker than a year ago.
Although prices are rising in Hobart there is an apparent lack of stock for sale, with sales over the first six weeks of 2021 –0.6% lower than they were over the same period last year, while in regional Tasmania sales volumes are 7.4% higher than this time last year.
The number of views per for-sale listing in Tasmania has risen by 58.8% year-on-year and although that is a significant rise, it is the smallest of any state. Throughout the states, Hobart has recorded the smallest increase (33.7%), while the South East has recorded the largest at 83.4%.
After many years of property price falls, prices increased across Darwin (4.5%) and regional NT (2.0%) over the 12 months to January 2021. Highlighting the improving conditions, there has been a 20-day decline in days on site over the year in Darwin and a 45-day decline in regional NT.
Sales volumes started very strongly in 2021, with sales over the first six weeks of this year 67.4% higher than the previous year and in regional NT, sales volumes were 175.0% higher.
NT has recorded a 69.4% rise in views per listing year-on-year, with an annual rise of 86.3% in Darwin and 27.3% in regional NT.
Dwelling prices in Canberra have increased by 6.0% over the 12 months to January 2021, while days on site has fallen from 63 days to 51 days over the same period.
Over the first six weeks of 2021, sales volumes in Canberra were 14.4% higher than they were over the same period last year.
Meanwhile, for-sale views per listing have more than doubled over the past year, increasing by 114.4%.
Interest rates are expected to remain at record-low levels for a number of years and demand for properties for sale currently sits at historic-high levels.
Given this combination and ongoing low volumes of stock for sale, which may change a little over the coming months, I fully expect that property prices will continue to rise over the coming months and the growth may accelerate.
The potential challenge for the market over the coming months is the removal of JobKeeper and JobSeeker, which may lead to some forced sales; however, it should be noted that only a small proportion of mortgages remain on deferrals at this stage.
Despite this potential challenge, the outlook for residential property remains strong.
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