Australia Property Market Update
For the week ending 25 August 2020, the national asking price rose 0.3% for houses and 0.4% for units, compared to the week prior. Across capital cities, property prices increased by 0.1% for houses and declined by 1.6% for units.
Month on month, the national asking price decreased by 1% for houses and increased by 0.1% for units. Sydney and Brisbane recorded an overall decline while other capital cities recorded mixed results.
Compared to 12 months ago, this reflects a 5.1% increase in both house and unit prices nationwide. Across capital cities, this reflects a 6.5% increase in house prices and no change in unit prices. According to SQM Research, national residential property listings decreased by 6.3% from 312,680 listings in July to 293,053 listings in August. While all capital cities recorded declines, Melbourne led the pack with a 13.2% decrease over the month. This was followed by Hobart at 9.4% then Canberra at 6.3%.
Year on year, property listings are down 10%. All capital cities recorded a decrease with the exception of Sydney where stock increased by 1.2%. Darwin and Hobart recorded the most significant declines compared to the year prior, at 26.9% and 21.4% respectively.
Rental values
For the week ending 28 August 2020, the average weekly rent across Australia held steady at $459 for houses and decreased by 3% to $372 for units, compared to the week prior.
Across capital cities, Canberra recorded the highest average weekly rent for houses at $639.60 and for units at $470.80. In contrast, Adelaide recorded the lowest weekly rent for houses at $408.30 and for units at $315.40.
Month on month, the national weekly rent rose 0.9% for houses and 1.4% for units. Sydney, Melbourne, Adelaide and Brisbane recorded overall declines in weekly rents while Perth recorded an overall increase.
Compared to a year ago, national weekly rents have increased by 4.8% for houses and by 1.9% for units. Meanwhile, capital city weekly rents have decreased by 2% for houses and by 5% for units
Vacancy rates
The national vacancy rate decreased from 2.2% in June to 2.1% in July with 71,760 vacant residential properties Australia-wide. All capital cities recorded a decrease in vacancy rates compared to the month prior, with the exception of Melbourne, which recorded an increase of 0.1%.
Sydney recorded the highest vacancy rate nationwide at 3.6% while Hobart recorded the lowest vacancy rate nationwide at 0.7%.
Year on year, the national vacancy rate is 0.2% lower. Compared to the year prior, Sydney, Melbourne and Hobart recorded higher vacancy rates while Brisbane, Darwin, Canberra, Adelaide and Perth recorded lower vacancy rates.
Some CBD vacancy rates continued to improve from record highs.
Sydney CBD’s vacancy rate decreased from 13.8% in June to 13.2% in July, Brisbane CBD’s vacancy rate decreased from 14% to 13% and Melbourne CBD’s vacancy rate held steady at 8.8%. Conversely, Adelaide CBD’s vacancy rate increased from 7.1% in June to 7.6% in July and Perth CBD’s vacancy rate rose from 5.3% to 5.5%.
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Cash rate and predictions
The RBA kept the cash rate unchanged at 0.25% as “the downturn is not as severe as earlier expected and a recovery is now underway in most of Australia.” However, with the coronavirus outbreak in Victoria, the Board considered a number of scenarios during its recent meeting.
RBA Governor Philip Lowe said, “In the baseline scenario, output falls by 6% over 2020 and then grows by 5% over the following year. In this scenario, the unemployment rate rises to around 10% later in 2020 due to further job losses in Victoria and more people elsewhere in Australia looking for jobs. Over the following couple of years, the unemployment rate is expected to decline gradually to around 7%.”
“A stronger recovery is possible if progress is made in containing the virus in the near future. This progress would support an improvement in confidence and a less cautious approach by households and businesses to their spending.”
“On the other hand, if Australia and other countries were to experience further widespread lockdowns, the recovery in both output and the labour market would be delayed.”
Housing markets diverge during COVID-19
According to the latest Corelogic statistics which shows the cumulative dwelling market value change from the onset of the COVID-19 pandemic, Melbourne property prices have dropped 3.5% while Canberra property prices have increased by 1.3%.
CoreLogic Head of Research Australia Eliza Owen said that there are cyclical and structural reasons for Melbourne’s steep decline in dwelling values since March.
“Cyclically, Melbourne property is subject to more volatile growth rates, and is also presenting strong declines off the back of very high growth rates through the previous upswing. Structurally, there has been an enormous demand shock to the Melbourne property market with the closure of international borders, where Melbourne previously had the highest level of net overseas migration of the capital city markets.”
Meanwhile, Perth has seen a 2% decrease, Sydney has seen a 1.7% decrease, Brisbane values have dropped 0.6% while Darwin property prices have remained unchanged.
On the other hand, Canberra, Hobart and Adelaide have seen increases in dwelling values due to the easing of monetary policy. The cash rate was reduced to a thirty year low of 0.25% in March, where it has remained since. RBA research shows that typically when the cash rate is reduced, property values will increase as a result of cheaper debt and greater purchasing capacity.
As a result, major banks and non-bank lenders have slashed variable and fixed home loan rates to record lows over the past few months in a bid to attract more home buyers. This has helped support housing demand and insulate housing values since the start of the pandemic.
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