Experts compare last year's experience to what is happening now
Spring has long been a popular time of the year for both buyers and sellers in the Australian property market, but, because of the COVID-19 pandemic, many vendors across the country have decided to sit on their hands and wait for more certainty. There have been suggestions that summer could become the new spring in 2021 due to the current lockdowns in place and the projected easing of restrictions once the states and territories reach 70-80% full vaccination.
According to REIA president Adrian Kelly (pictured above), the Melbourne real estate industry has been impacted for quite some time due to COVID. As recently reported by the Financial Review, Melbourne listings saw a fourfold increase year on year in the lead up to spring while Sydney listings were down by 29% compared to the same time last year.
Kelly said the figures in Melbourne at the time made perfect sense when you consider the city was in lockdown for much of 2020, compared with Sydney which had minimal disruption.
“Melbourne had a lot of catching up to do and that’s where those new properties came from,” Kelly told MPA. “Unfortunately, they’ve closed it up again.”
While Sydney real estate agents have still been able to conduct one-on-one physical inspections, with auction clearance rates sitting at around 80%, their Melbourne counterparts have been severely impacted by a ban on any physical inspection of property during lockdown, he said. This factor has meant the fourfold increase of listings in the lead up to spring has already become just a memory.
“Unfortunately, Melbourne estate agents are essentially closed,” he said. “I know there were an awful lot of spring campaigns and auctions going to be run and they’ve all been postponed.”
According to CoreLogic head of research Australia Eliza Owen (pictured below), while the current lockdowns in Sydney and Melbourne have impacted market activity, there is some indication that the impact won’t be as severe as last year – particularly in Sydney.
“Ultimately we can expect transaction activity to be lower than what it would have otherwise been through lockdowns, though there is some suggestion that between a more adaptable real estate sector, and more resilient consumer sentiment, the decline in sales and listings may not be as sharp as what was observed through 2020,” she told MPA.
She said while transaction activity in the lead up to spring slowed in Sydney, it stayed stronger than it did during the 2020 lockdown.
“Through stage two restrictions last year, there was a decline in Sydney sales volumes of -36.5%, compared with a -18.0% decline in sales volumes through August,” she said. “New listings added to market each week have actually started to rise in recent weeks, though are still sitting -13.4% lower than in the equivalent period of 2020.”
Owen also pointed to the impact that a ban on physical inspections was having in Melbourne but explained that the impacts hadn’t been as severe as last year, with sales volumes down almost -40% this August compared with more than -50% last July to August.
“Last year we saw a fairly strong snap-back in transaction activity as restrictions eased,” said Owen. “However, it’s uncertain whether the resurgence in sales activity will be as strong when restrictions ease this time around, given affordability constraints and uncertainty about economic recovery from current lockdown conditions.”
Housing affordability has become a hot topic issue in light of the rising property prices caused by pent up demand and record low interest rates. Westpac CEO Peter King told a parliamentary committee last week that housing affordability was “pretty stretched,” with Westpac’s preferred measure – the time it takes to save up for a home deposit – close to the worst it had been in 30 years.
The problem is something that Kelly believes won’t be resolved any time soon. He told MPA that prices were likely to continue rising and that a correction was not on the cards next year.
According to Owen, periods of lockdown don’t tend to have a major impact on housing affordability, with home values in Sydney and Melbourne rising just 1.8% and 1.3% respectively during lockdown last year.
“Given there is generally a concurrent decline in supply and demand during lockdowns, the net impact on prices isn’t too material,” she said. “Lockdowns certainly don’t help housing demand in the long run, but very expansionary monetary policy, and a relatively low level of listings on the market continues to put upward pressure on values.”
But, according to Kelly, demand has outstripped supply throughout this year’s lockdowns – a factor that will impact housing affordability as prices continue to rise.
“The demand is still there, not only in Sydney and Melbourne but across the whole country,” he said. “If agents are able to bring properties to market, they are still likely to sell fairly quickly.”
When coupled with a shortage of stock across the country, a wider trend of city-dwellers moving to the regions and more Australian ex-pats returning home, it seems likely that the Australian dream of home ownership will grow dimmer and dimmer for many first-home buyers across the country.
“Here we are, we’ve got all of this pent-up demand and we’ve got very low supply of established housing and that’s why prices are rising,” said Kelly.