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Housing Market Update - June 2020

Corelogic has released its National Housing Market Update for June 2020.

Key points:


The Australian property market experienced the following impacts as many of the social distancing policies that have impacted on housing markets and economic activity have either been relaxed or lifted:

  • Housing sales bounced back by an estimated 18.5% in May. This coincides with a consistent rise in consumer sentiment and eased social distancing policies through the month. However, housing market activity remains well below the historical average.

  • We`ve seen a sharp reduction in the number of auctions being withdrawn, and more vendors are testing the market under auction conditions rather than accepting an offer prior to the auction. The combined capital city clearance rate bounced back from a low of about 30% in April, to nearly 63% in the week ending 24th of May.

  • Improved confidence is also flowing through to a rise in new 'for sale' listings. However, the total listing count, which includes new listings as well as re-listed properties, has continued to trend down. Implying an overall healthy balance between supply and demand.

  • The most rapid decline in housing values is across the top quartile of the Melbourne and Sydney markets. Melbourne’s most expensive quartile of the market recorded a 1.3% drop in values over the month, compared with a 0.6% fall across the broad ‘middle’ of the market and a 0.3% fall across the most affordable quartile. Similarly, in Sydney, the top quartile was down 0.6% while the lower quartile posted a 0.1% increase in values. We consider that this reflects the reduction in FOMO ('fear of missing out') behaviour that dominated the significant capital grown in these markets of the last 12-18 months.

  • Rents were generally steady in May. However, this was not enough to offset the overall downward trend in rents. Unit markets are looking weaker than house markets over the past two months, with unit rents falling 0.8% since March across the combined capital cities while house rents were steady.

  • Investor buying activity also remains low. The investor participation rate continued to fall to 26.2% from historical highs of 40%-45%. This reflects the change in investor attitudes towards rents and in particular the uncertainty of migration which ultimately fuels the demand for property. Consequently, first home buyer activity is high.


Insights:

  • Over the remainder of the year, we consider the economic impact on property markets will differ between the following 2 key market segments. Investors markets (i.e. suburbs and properties dominated by investor owners and renters) are likely to suffer worse than owner-occupier markets.

  • For example, investor dominated inner-city apartment rents are looking precarious due to an imbalance between demand and supply. With a large amount of new inner city, high-rise apartment projects recently completed, and stalled migration and foreign student arrivals, inner-city unit rents are likely to fall more substantially than other sectors of the market. The weakness in rental demand is likely to be compounded by significant job losses and income reductions across the hospitality, tourism and arts sectors, in which a larger portion of workers typically rent.

Should you wish to discuss this in the context of your financial situation, please do not hesitate to contact us to speak to an adviser.



Corelogic Downloads:

CL-HOUSING-MARKET-UPDATE-C916B45F
.pdf
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CoreLogic home value index June 2020 FIN
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