Australia’s property market is shaping up for a busy winter period as the industry continues to go from strength to strength.
Thanks to a combination of historically low interest rates, expanded government incentives for first home buyers, and increased savings rates, all signs indicate the upcoming winter season will be a hot market instead of the usually quiet period.
CoreLogic’s latest Housing Market Report has revealed that national home values rose an astonishing 7.0% in the three months to May, which is the highest quarterly growth rate in the country since November 1988.
Every capital city recorded an increased rate of appreciation in home values, with Sydney leading the pack with a quarterly rise of 9.3%, while Perth is the lowest spot at 3.8%.
Median time listed on the market has also fallen across the country to just 28 days, down from 42 across the same period in 2020.
While it’s possible that this record growth won’t be sustainable for the upcoming months, these figures indicate that there is enough buyer demand for sellers to sell now instead of waiting for the usually busy spring season.
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Director of economic research at realestate.com.au, Cameron Kusher, said while he’s not expecting spring numbers, the property boom thanks to the effects of COVID-19 is set to continue.
“We are still seeing weekly preliminary sales at volumes similar to spring of last year and demand remains at very high levels. While it won’t be the new spring, the winter housing market looks set to be much more active than what we see in a typical year,” Mr. Kusher said.
According to the Domain May Auction Report, clearance rates were also up in all capital cities besides Brisbane, with Canberra setting a new record high at just under 90%.
Sydney, Melbourne, and Adelaide also saw the largest number of auctions scheduled in a single month since the records at Domain began, indicating that June could be another big month for homes going under the hammer.
The CoreLogic Housing Market Report has also provided insight into the number of new listings posted in May.
Instead of the usual slow decline as the weather changes, listings increased through May and sat 14.7% above the five-year average for this time of year.
If the number of new listings for June keeps pace with May’s growth, buyers will have more options available during the early winter period than average.
Another significant factor that could help winter buying numbers improve from years gone by is the return of investors.
Eliza Owen, Head of Australian Research at CoreLogic, believes investors are returning as first home buyers start to vanish due to the low rates available and robust rent increases.
“At least in the past couple of months, we’ve seen this increasing growth in the investor segment as first-home-buyer demand has fallen away,” Ms. Owen said.
“Investors are likely attracted to the market at the moment because rents have risen very strongly and, of course, [there] is very strong capital growth, not to mention very low interest rates both for owner-occupiers and investors.”
She also noted that first home buyers have recently been pushed out of the market due to the rapid rise in prices experienced around the country.
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“Looking at the ABS (Australian Bureau of Statistics) finance data, first-home-buyer lending has fallen 5% in the past two months,” Ms. Owen said.
“But my guess is that, with house prices rising as quickly as they are, first home buyers aren’t going to be able to keep up in this market unless they’ve got significant help from parents or maybe access to a low-deposit home loan.
Experts say that while prices may still slightly increase, the eye-popping figures that became the new normal should subside during the last half of the year.
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Capital Economics’s Australian and New Zealand Economist Ben Udy expects price easing to start shortly.
“While annual price growth will continue to rise strongly in the near term thanks to the favourable base, we think monthly price gains will ease in the months ahead.”
This is echoed by Realestate.com.au economist Anne Flaherty, who expects prices to increase further, albeit at a more reasonable rate than the last three months.
“I expect prices will continue to rise over winter, however, with slightly reduced demand, stimulus removed from the market, and rises in longer-term fixed rate mortgage rates, prices are likely to rise at a slower pace,” she said.
Although significant price reductions don’t’ seem to be on the horizon, this winter season is shaping up to be one where both buyers and sellers will be happy.
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Words by Rimas Veselis
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