Top Trends to Watch out for In the Australian Property Investment Market

Top Trends to Watch out for In the Australian Property Investment Market

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The steady evolution of Australian property investment market has been its hallmark during the corona virus pandemic. Notwithstanding the extended lockdown, the Australian housing markets have shown perseverance in comparison to other sectors. It has negated all prophecies of doom, which were formerly made when the pandemic first struck.

The Australian authorities have accelerated their vaccination drive to stop the rising covid-19 cases. In the previous month 3 million more people received their second dose of vaccine. Even after a prolonged lockdown in Sydney and Melbourne, the spring season brings energetic property investors for the Australian real estate market. The sales rate of residential properties is above a record 30 year average, despite small elevation in property registration.

The eager hopefulness of consumers, coupled with the fact that Australia’s tightening measures to stop transmission of covid-19 infection, and the country`s subsequent economic recovery is reopening business.

Property Prices in Australia

Despite low mortgage rates, and the availability of home loans, the property prices have moved up. There are fewer homes for sale.

The availability of limited homes has unleashed competition among buyers to secure their purchase. This is causing boom in Australian housing prices.

Sydney property registered an uptick of 0.4% during the last week. Melbourneand Brisbane property prices stepped-up 0.2% and 0.1%respectively. Over the course of last year Sydney house prices gained 22.0%, Melbourne 13.9%, and Brisbane 18.5%.

According to corelogic.com.au, clearance rates and volumes, 668 auctions were held in Sydney last week. Concerning 593 developments, the percentage rate of success was 83.8. The auctioning of 497 outcomes,52.7% were bought up earlier than the auction date. There were 607 auctions held in the week prior to last one.

In Melbourne, 54.4% opening auctions were sold. The data of the 320 results reported 42.5% pull out. However, with one on one inspection getting a green signal, the withdrawal rate is expected to come down.

Changes in capital city dwelling values-

Capital CityWeekly ChangeMonthly ChangeYear To Year Change12 Months Change
Sydney0.4%1.5%20.6%22.0%
Melborne0.2%0.9%12.8%13.9%
Brisbane0.1%1.6%15.8%18.5%
Adelaide0.4%1.7%13.5%18.3%
PerthN.A.N.A.N.A.N.A
Combined 5 Capitals0.3%1.2%16.2%18.0%
Courtesy – corelogic.com.au

According to Corelogic’s head of research, Tim Lawless, “Housing prices have risen almost eleven times faster than wages growth over the past year, creating a more significant barrier for entry of those who don’t yet own a home.” We have to take into account that the ongoing lockdowns will desiccate the property market over upcoming weeks. However the way the markets are trending, and the growth of price higher than long term averages is a sign that the housing value will be on the rise.

Short supply of housing properties in Australia

New dwelling listings in Australia show a crunch in the availability of properties. These listings are a sign that property prices will keep on rising. Even though permission to start construction is moving down, they are in better shape than last year.

There were 32,466 listings over the few weeks ending on August 29th.  This is 16.8% above same time last year, but – 5.8% below five years average.

As shown in the line chart, listings of new stocks happen at the end of 3rd and 4th quarter, if we consider the cycle of April to March sequence. Most draft red herring prospectus happen at the end of financial year. From ten it would take some time to get listed. The price figure is same as it was in 2020. Covid-19 pandemic and lockdowns are the reason for unenthusiastic listings and sales activities.

Australian Property Investment Market

Courtesy Corelogic.com.au

Australian Housing Market- Property Sales by Value.

The consumer expenditure response has narrowed because they are not going out on international holidays, at musical or theatre performances. The uneasiness around their job safety and business has driven them to increase their savings. As their savings grew, Australians began competing at higher prices for houses.

The bar plot below shows sales of property by price bracket. It shows that sale of high value houses are on rise,whereas high value unit prices have lagged behind. Houses from all price segment has seen uniform sale across Australia, while high price units are rare sale.

High priced houses in Sydney and Melbourne sale better than other cities. Low and mid range units in these areas are in demand.

Australian Property Investment Market

Courtesy- housingdata.gov.au

In most cities the investment properties for sale are outnumbered by the demand. The limits on urban fringe housing development are also the reason behind rising prices in these cities. The disparity between the properties coming up for sale and property being sold is evident that prices will keep on rising.

REA Insights Buyers Demand Index:

REA Group limited is a market-leading digital advertising business which specialises in property. REA insights weekly demand index, which measures high-intent buyer activity on realestate.com.au. The real estate market reached its high water mark in February. The “high intent buyer activity” escalated 2.8% last week.

Housing demand in Victoria went up to 7.5% this week. With the easing of restrictions in New South Wales, and Australian Capital Territory, buyers demand improved since February 2021.

The weekly demand index has seasonality, and it is cyclic in nature. It drops two times, one in January and the other in April after seeing a rise. After the second drop it rises and remains fluctuating sideways.

Australian Property Investment Market

Units are more in demand since the last year. According to Paul Ryan, an economist with REA Insight there is influx of first home buyers and brimming crowd at auctions, afraid of missing the opportunity. This has attracted their attention to units. Courtesy- realestate.com.au

Australian Property Investment Market

Median Property Prices:

 Residential property prices jumped up 19% in Sydney and Canberra. In Melbourne they hiked 15%.  Across Australia home prices are at high level. Property Investments are more than they did a year ago on an average home. Sydney median house price is $ 1.41 million.In Melbourne, it is at $1023000. In Brisbane, the median house price is $950,000. In Perth it is $596,000. In Canberra,median house price is at record $1015,833. The national median house price in Australia is $955,927.

Vendor Metrics

Despite the lockdowns, Australia has considerable demand for housing. The performance measures of suppliers have a critical shortage in comparison to the demand.The total number of days available to sell the property is very low. Vendor discount is also very low.

In Sydney median time on market for houses (TOM) is 28 days, and 37 days for units. Median vendor discount is -2.8% on houses and -2.5% on units.

In Melbourne median TOM for houses is 41 days, and 55 days for units. Median vendor discount is -2.8% on houses and -2.0% on units.

In Brisbane median TOM for houses is 35 days, and 55 days for units. Median vendor discount is -2.4% on houses and -2.5% on units.

In Adelaide median TOM for houses is 32 days, 35 days for units. Median vendor discount is -3.1% on houses and -2.1% on units.

In Darwin median TOM for houses is 45 days, 60 days for units. Median vendor discount is -3.2% on houses and -5.1% on units.

Last weekend’s auction clearance rates

The delta variant of covid-19 has not deterred the enthusiasm of auction markets in Australia. While the second week of September produced strong results for sellers, despite being lowest registration for non-holiday season since early February. 1272 auctions were reported on Saturday this weekend, it was 1152 last weekend.

The preliminary clearance rates of different Australian cities-

Clearance rate of Sydney’s property auction – 85.1%

Clearance rate of Brisbane’s property auction- 83.7%

Clearance rate of Adelaide’s property auction-89.2%

Clearance rate of Canberra’s property auction- 94.1%

Courtesy- Dr. Andrew wilson’s twitter  My housing market 18th September 2021.

Conclusion:

Even though the prices have shoot up, buying a house is a top priority among Australians. One of the most common query people come across when they begin or scale up their property profile is which type of property to buy or invest in. There is no rule of thumb, but there are ways in which you can get guidelines, insights, tips on what you are looking for. A suitable strategy for can go a long way.

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