You could be forgiven for worrying about the state of our property markets, especially if you listen to the regular media.
It’s really hard to find some good news amongst all the bad news about rising Coronavirus cases in Sydney and Melbourne, a second round of lockdowns in Melbourne, rising unemployment and a recession we were working our way out of, now only to be hit by falling consumer and business confidence.
However, there is good news out there if you look for it including a recent report by Nerida Conisbee, chief economist of RealEstate.com.au who shared five positive property trends the she is seeing.
1. Property buyers are still active
Conisbee noted that the number of home buyer searches on realestate.com.au has continued to surge and is now up 72.5% from the lows experienced at the end of April.
At the same time, sellers are coming back into the market and with a higher level of consumer confidence recorded in June 2020 is seeing more properties coming onto the market compared to the same time last year.
A big challenge for buyers at present is that there are very few “good” properties listed for sale, but
2. The number of distress property for sale remains very low
Despite the concern that September will mark the beginning of a gradual withdrawal of assistance for mortgage holders and despite the cries of those saying there are already many investors experiencing mortgage stress, Conisbee explains that there are currently limited signs of distressed sales on realestate.com.au with only five mortgagee listings in June out of more than 160,000 listings.
This is less than half the number compared to the same time last year.
Clearly certain segments of our property market are more exposed to financial stress as our economic worries continue, in particular those suburbs with high rental vacancy rates, or those that rely on foreign students.
3. First-home buyers remain active but investors have backed off
Enquiry levels remained strong for first-home buyers in June, more than doubling in most capital cities says Conisbee.
However she is still yet to see signs of increased activity from investors.
This strong first-home buyer demand, combined with stimulus measures such as the federal government’s HomeBuilder scheme, which excludes investors, has led to very strong demand for house and land projects.
Of course many of these buyers don’t recognise that the HomeBuilder scheme is to help the construction industry and not first homeowners, and they will end up overpaying and buying in locations with a will exhibit minimal capital growth over the next few years.
At the same time the drop in investor activity, both local and offshore, means off the plan developments remain muted.
4. House prices are not collapsing
Given we are currently in the midst of a recession and unemployment is rising, it’s surprising that house prices have remained steady says Conisbee
In fact, in some places such as Canberra, and for some property types such as those in premium suburbs, prices are still rising.
A stable banking sector, lots of government stimulus, a lack of properties to buy and a lack of alternative investments are just some of the reasons why this is the case according to Conisbee.
5. Melbourne lockdown 2.0 could derail the recovery
Property market conditions were particularly strong in June but the current surge in COVID-19 cases in Melbourne could break the city’s recovery says Conisbee.
For the rest of Australia, it may actually be a positive as economic activity is driven northwards.
This is of course dependent on other states managing their own virus cases.
For now, the focus should be on maintaining consumer and business confidence across Australia.
According to Conisbee, if this can be done, it will ensure a sharp recovery for the economy and property market.