If ever there was a need for a case study about property market cycles, the past 18 months would pose as a great demonstration. After a soft start to the 2019 calendar year, the stage was set for a very underwhelming FY2020, writes Mathew Tiller.
However, the start of FY20 saw the hangover from the banking royal commission began to lift. We saw lending restrictions began to ease, investor confidence rose, and the RBA started reducing the official cash rate.
The combination of these factors saw auction clearance rates shift from the low-40 per cent in early 2019 to mid-60 per cent at the beginning of FY20. This shift gained momentum over the second half of 2019, providing an air of optimism for the spring and Christmas period.
Roll on to 2020 and this optimism became a recovery, with auction clearance rates in the high-70 per cent, and even vendor confidence returned, with listings pushing above the 10-year average, for the first time in a long time.
Positivity had returned to property markets just in time for autumn, but then March 2020 is when COVID brought everything to a shuddering halt. Lockdowns were enforced, open homes cancelled, and vendors began to withdraw properties from the market.
When lockdowns lifted, it was slow, but buyers where curious and they began to turn up to opens and book inspections, which in turn resulted in a significant amount of sales transacting.
So, where we are now? Buyer demand, particularly from first home buyers and occupiers, remains elevated. They are out looking to take advantage of record-low interest rates and some are out to hunt down a bargain. The real issue is listings, which have been slow to return and this unevenness between demand and supply has seen prices and values hold up.
Looking ahead, what do we expect for FY21? The biggest unknown remains: COVID. Will the current outbreak cause further restrictions across the country or will markets remain open?
The most important question is what will happen to the economy and property markets once government stimulus and bank mortgage deferral measures wind down. As seen in recent days, we expect banks to continue to support borrowers, as they return to work and business returns to normal; however, not everyone will be able to pay their mortgage, and unemployment is expected to remain elevated.
Home owners looking to sell to relocate or “re-size” and those facing mortgage difficulties will inevitably cause more properties to come onto the market as we head into spring.
On a positive note, we know that with interest rates at record lows, there will be buyers ready, and willing, to purchase these properties as they come onto the market — we are seeing it now, and it will go some way to soak up some of these listings.
By Mathew Tiller, head of research, LJ Hooker