By Cameron Kusher, Executive Manager – Economic Research at REA Group
The residential property market has seen a fast start to 2021, fuelled by unprecedented levels of demand for housing and low stock available for sale, which has propelled prices and sales volumes higher so far this year. The combination of these factors is resulting in properties selling quicker and boom-time auction clearance rates. At this point, there is little to suggest that the market momentum is waning, and I expect the buoyant market conditions to continue over the coming months.
Over the last few weeks there have been some concerns about a looming spike in inflation, with 10-year government bond yields jumping. However, the Reserve Bank (RBA) has reiterated at this month’s board meeting that they continue to expect the economy to see inflation below its target range and unemployment rates falling short of full employment. As a result, they expect, at this time, that official interest rates will remain on hold until at least 2024. It should be noted that Australia’s economic recovery continues to be stronger than forecast and should that continue, it may mean that the timeline for lifting official rates is moved forward.
Nevertheless, the historic low borrowing costs – and the likelihood they will remain as such for a number of years – is encouraging record demand, resulting in increased sales activity and higher property prices.
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. While I expect demand for new homes to remain strong while HomeBuilder is available, once it has ended, and assuming international borders aren’t reopened, there may be some challenges for developers of new housing stock. In saying that, a significant pipeline of new construction work has now been built due to the stimulus.
The latest data on new mortgage lending showed that it reached a record monthly high in January 2021. The value lent to both first home buyers and non-FHB owner-occupiers was at a historic high over the month and while investor lending remains a long way from its peak, it has risen by 22.7% year-on-year, showing a significant lift in demand.
There were previously concerns about a mortgage deferral cliff, yet the latest data from the Australian Prudential Regulation Authority (APRA) for January 2021 shows that 1.84% 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 they currently look like .
Sydney property prices have increased by 4.3% over the 12 months to February 2021, while regional NSW prices have increased by 10.2%. Sydney properties sold one day quicker in February 2021 than they did a year earlier, while in regional NSW, days on site has fallen by 25 days relative to a year ago.
Throughout the first 10 weeks of 2021, there has been 22.9% more sales than the same period last year in Sydney and 33.8% more sales in regional NSW.
The number of views per listing for properties listed for sale was 84.8% higher in February 2021 than the previous year. The outer regions of Sydney have recorded the largest increases in views per listing over the year. Meanwhile in regional NSW, the Southern Highlands and Shoalhaven, along with the Mid North Coast, have recorded a trebling of views per listing.
Prices in regional Victoria have increased by 10.2% over the 12 months to February 2021, a much larger increase than the 3.9% increase recorded in Melbourne. The typical days on site for a Melbourne property is 30 days, which is unchanged over the year, while in regional Vic there has been a 15-day reduction in days on site over the past year.
Over the first 10 weeks of 2021, there has been 36.0% more sales than over the same period last year in Melbourne and 28.4% more sales in regional Vic. It seems buyers are making up for lost time during 2020, with a significant surge in sales so far this year.
The number of views per listing throughout Victoria is 53.0% higher than it was at the same time last year. The Mornington Peninsula has recorded a doubling of views per listing over the past year, while no other region of Melbourne has seen views per listing increase by more than 50%. In regional Victoria, the only regions that haven’t seen views per listing more than double over the year are Ballarat, Geelong and North West.
Brisbane property prices have increased by 4.7% over the past year, which is slightly stronger growth than Sydney and Melbourne, while regional Qld prices are 7.5% higher. The increasing demand for properties is highlighted by days on site being three days shorter than a year ago in Brisbane and 11 days shorter in regional Qld.
Sales activity has lifted significantly this year in the state, with cumulative sales over the first 10 weeks of this year 30.8% higher than last year in Brisbane and 42.6% higher than a year ago in regional Qld.
The low volume of stock for sale and surging demand has led to views per listing jumping 92.2% higher than a year ago in the state. Within Greater Brisbane, Brisbane-East and Logan-Beaudesert have seen views per listing double over the year and in regional Qld, views per listing have doubled in Central Queensland, Darling Downs-Maranoa, Gold Coast, Sunshine Coast and Wide Bay.
In Adelaide, property prices have increased by 6.1%, which is only marginally lower growth than the 6.2% increase in regional SA prices. Further evidence of the strong demand for housing is seen in days on site, which has fallen by 12 days over the year in Adelaide and 22 days in regional SA.
Comparing the first 10 weeks of this year to the same period last year shows that sales in Adelaide are currently 21.2% higher, while in regional SA they have increased 48.0%, further highlighting the strong demand currently being experienced.
In February 2021, the average number of views per listing was 64.9% higher than a year ago. The south of Adelaide has seen a significantly larger increase in views per listing than other areas of the capital, while views per listing have almost doubled outside of Adelaide in South East and Barossa-Yorke-Mid North.
Growth in property prices throughout WA has been stronger over the past year in regional WA (8.6%) than it has been in Perth (5.4%); however, after years of price falls in both regions, prices are now pushing higher. Further highlighting these price increases is the fact properties are selling faster, with days on site in Perth 13 days lower than a year ago and in regional WA it is nine days lower.
Sales volumes are significantly higher this year than last, with cumulative sales over the first 10 weeks of this year 36.0% higher than the same period last year in Perth and 79.8% higher in regional WA.
WA has recorded a 63.9% year-on-year increase in the number of views per listing. In Perth, Mandurah has overwhelmingly seen the largest increase in views per listing and the inner suburbs the smallest, while the increase in views per listing has been fairly consistent in most regions with Outback (North) the laggard in terms of growth.
Property prices have continued to rise in Tas over the past year, with Hobart prices rising a further 9.9% and regional Tas prices up by 11.2%. Despite the strong demand pushing prices higher, days on site is unchanged over the year at 30 days, while in regional Tas it has fallen by nine days.
A lack of stock for sale seems to be still hindering the market, with property sales over the first 10 weeks of this year just 9.6% higher than the same period last year in Hobart and sales are up 9.8% in regional Tas.
Views per listing in Tas has increased by 61.5% relative to a year ago. Regional areas of the state have recorded much greater increases in views per listing than Hobart. It may be that deteriorating housing affordability in Hobart is resulting in buyers looking for properties further afield.
After many years of property price falls, prices increased across Darwin (10.5%) and regional NT (0.9%) over the 12 months to February 2021. Highlighting these improving conditions, there has been a 31-day decline in days on site over the year in Darwin and a 39-day decline in regional NT.
Sales volumes have started very strongly in 2021 with sales over the first 10 weeks of this year 48.9% higher than the previous year in Darwin and in regional NT sales volumes are 134.6% higher.
NT has recorded a 64.9% rise in views per listing year-on-year, with an annual rise of 84.6% in Darwin and a 56.8% increase in regional NT.
Dwelling prices in Canberra have increased by 8.4% over the 12 months to February 2021, while days on site has fallen from 31 days to 25 days over the same period.
Over the first 10 weeks of 2021, sales volumes in Canberra are 19.6% higher than they were over the same period last year.
Meanwhile, views per listing have increased by 86.2% over the past 12 months.
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 little over the coming months, I fully expect that property prices will continue to rise and the growth may accelerate.
The potential challenges for the market over the coming months are the removal of JobKeeper and JobSeeker, which may lead to some forced sales; although, it should be noted that only a small proportion of mortgages remain on deferrals at this stage.
Despite these potential challenges, the outlook for residential property remains strong. However, the increasing prices are expected to lead to deteriorating housing affordability, which is likely to be exacerbated once interest rates begin to rise.
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