How is the Brisbane property market faring amid the “new normal” that resulted from the COVID-19 outbreak?
Since the implementation of lockdown measures, which has consequently affected most sectors, the government has spent over $200 billion in its three stimulus packages to help support jobs and stabilise the economy.
Like most major capital city markets, Brisbane has witnessed a significant drop in new listings in the four weeks to mid-April of 20 per cent, with vendors likely becoming too scared to sell due to the ban on auctions and open homes.
According to Domain: “Social distancing restrictions that banned open homes and auctions will also slow buyer activity, as well as low consumer sentiment, economic uncertainty and job security fears deterring buyers.”
However, Domain stated that low-interest rates, government stimulus and mortgage payment relief measures could “shelter” housing prices from the anticipated drop in market activity.
Ultimately, despite the headwinds, Propertyology’s head of research Simon Pressley said that the property sector can get Australia out of its “coronavirus cocoon”, just as it did during the major economic downturns in history.
For instance, 29 years ago, real estate led the rebound out of Australia’s last recession, when the unemployment rate hovered around 10 per cent during the recession year and the following two years.
Over those three years ending 1993, all capital cities produced property price growth of between 2 per cent (Melbourne) and 27 per cent ( ).
A similar story was seen 12 years ago during the global financial crisis – the biggest economic downturn in history.
Property prices increased once again in all of the eight capital cities over the three years ending 2010, with Darwin (32 per cent) and Melbourne (21 per cent) emerging as the best-performing capital city markets.
“Residential real estate is the one thing which is common to 25.5 million Australians. After all, shelter is an essential commodity… Housing is safe,” Mr Pressley highlighted.
From 25 March, the federal government introduced restrictions on real estate practices to curb the spread of COVID-19 infections, including the banning of public auctions and open homes. However, prior to this, detached houses in every capital city held strong or increased in value in the three months to 31 March.
Over the quarter, Sydney saw the strongest gains in house prices at 2.6 per cent, followed by Hobart (2.2 per cent), Melbourne (2 per cent), Darwin (1.2 per cent), Brisbane (0.6 per cent) and Canberra (0.3 per cent).
Meanwhile, Adelaide and Perth saw house prices remain steady quarter-on-quarter.
In terms of unit prices, Adelaide and Perth saw gains of 4.2 per cent and 1.6 per cent, respectively, while Sydney’s market saw a 2.7 per cent rise.
On the other hand, Hobart held steady over the quarter, while all other markets saw drops in the value of units.
With most of the reporting period taking place prior to the government’s social distancing regulations, Domain anticipated that future housing value figures won’t look as strong.
Meanwhile, other agents have not experienced any noticeable price softening to date.
In fact, across the board, most agents have confirmed that prices remain relatively unchanged at this point in time. Craig Loudon said, “Prices are remaining stable.”
According to Von Barnes of Pinnacle Properties: “when properties are presented well, priced appropriately and look great, they are still selling above expectations”.
“The gap has widened between buyers and sellers, whereby some buyers are making offers based on where they ‘think’ the market might be headed. But with good information, both buyers and sellers are able to make a better decision,” David Lazzarini added.
Moving forward, low-interest rates and mortgage repayment relief measures could “insulate” residential property prices from a looming “plunge” in housing market activity, according to CoreLogic.
Market indicators have already begun pointing to a slowdown in sales activity, with auction clearance rates falling below 60 per cent, which has prompted some analysts to forecast price declines of up to 15 per cent against an unemployment rate of 10 per cent (currently 5.1 per cent).
However, CoreLogic’s head of research Tim Lawless said that much will depend on the length of the current crisis and conditions underpinning the mortgage market.
“Considering the temporary nature of this crisis, along with unprecedented levels of government stimulus, leniency from lenders for distressed borrowers and record-low interest rates, housing values are likely to be more insulated than sales activity,” according to Mr Lawless.
“The extent of any fall in housing values is impossible to fathom without first understanding the length of time this health and economic crisis persists. Arguably, the longer it takes to contain the virus and bring economic operations back to normal, the higher the downside risk to housing values.”
CoreLogic’s latest Auction Market Preview showed that, for the final week of April ending 3 May 2020, the combined capital city auction market is expected to see a slight increase in auction volumes, to 544, following last week’s drop as the nation stopped to commemorate Anzac Day.
The lower volumes last week can also be attributed to the continued challenges around social distancing, with only 413 auctions held last week.
“While this week’s scheduled numbers are set to increase, with 544 properties expected to go to auction, volumes are substantially lower than what we would usually see,” CoreLogic said.
There are 184 Melbourne homes scheduled for auction this week, up from the 144 over the previous week. Meanwhile, Sydney is expected to be the busiest city for auctions for another week, with 254 properties scheduled to go under the hammer, up from the 192 held last week.
Adelaide, Brisbane and Perth are all expected to see a higher number of auctions held this week, while scheduled volumes are lower in Canberra. There were no auctions in Tasmania in the said week.
Going forward, CoreLogic said it’s likely that the number of scheduled auctions will remain substantially lower than normal, at least until social distancing policies are lifted and on-site auctions can resume.
New listing volumes have already plummeted as nervous sellers hold off listing their properties for sale until the uncertainty passes.
Sales agents across Brisbane have consistently reported a significant decline in the number of buyers in the market at the moment, which does not necessarily come as a surprise for the Brisbane-based agents.
During the first two and a half months of 2020, they saw record buyer depth in Brisbane, with quality properties almost always selling with high numbers of registered bidders at auction or with a high number of written offers under a multiple offer scenario for a property for sale by private treaty.
More recently, since the coronavirus changed the way in which people live and work and impacted so many industries, resulting in the closure of many business operations, the uncertainty around rising unemployment and the longer-term economic impacts have caused many buyers to simply pause their property search. Most of these buyers are taking a wait-and-see approach.
Ms Dale from Place at Bulimba in Brisbane’s inner east stated simply that “some buyers are sitting on their hands”, which has coincided with the drop in consumer confidence.
The majority of property investors who were looking to capitalise on the long-term opportunity that Brisbane may offer have backed off. Driven by fear and uncertainty, they have taken the safest option to wait.
However, the market, to date, is still being strongly supported by owner-occupiers, and this is something that has been a consistent theme across the city, according to many sales agents.
Furthermore, the quality of the buyers who are inspecting properties has improved.
According to Mr Lazzarini of Ray White Lutwyche in Brisbane’s inner north, “The ratio of buyers who inspect a property to those who subsequently make an offer has increased – indicating there is a strong core of quality buyers still actively searching for property right now”.
Further, Mr Loudon from Tobin Real Estate in the Brisbane eastern suburb of Carina added that there has been a bit of an uplift in buyer activity over the final weeks of April.
This is consistent with reports from realestate.com which show week-on-week searches in the “buy” site section are up 10 per cent in Queensland as of 23 April 2020, while searches in the “rent” site section are up 12 per cent week-on-week.
Capital city rents are 1.3 per cent higher over the quarter and 1.0 per cent higher year-on-year.
Regional rents are 1.0 per cent higher over the quarter and 2.6 per cent higher over the year.
Six of the capital city dwelling markets experienced a month-on-month increase in rent values, led by Perth, where rent values rose 0.8 per cent.
Brisbane rents were flat over the month, and Hobart rent values declined 0.4 per cent.
Sydney remained the most expensive rental market, with a current median rental value of $577/week. The differential between Sydney and the second-most expensive rental market, Canberra, has trended down to just $1.
According to CoreLogic’s head of research Eliza Owen, the March quarter results followed an upswing in values since September 2019, with January’s results showing growth of 0.5 per cent.
This occurred against slight moderations in new dwelling completions, which fell -7.6 per cent over 2019 from the previous year, and lessened the addition to supply in the rental market.
“Steady overseas migration also contributed to added demand in the rental market over 2019. It has been documented that overseas migrants typically initially rent when they first arrive from overseas,” said Ms Owen.
“However, it is worth noting that overseas migration rates had started to slow a little by September 2019.”
She added: “A deceleration in the growth of rents, as well as a decline in some areas, signals that this growth momentum is facing disruption. It is worth noting that rent data for the March quarter would capture little of the impact from COVID-19, where the regulations of social distancing that have been most disruptive to the economy commenced on 23 March.
Despite uncertainties, Bell Estate Agents’ Jonathan Bell said: “From a property management perspective, we’ve been pleasantly surprised as we were expecting a much greater impact than what we’ve seen. While we have seen a reduction in the enquiry levels on a property, the people who are enquiring are definitely interested, and they are ready to move.”
“But in saying that, we are having to be more aggressive with our pricing, and if properties are priced well, they are definitely renting, and they are renting quickly,” he said.
In terms of vacancy risk, experts are finding that location of properties has the greatest impact.
According to Mr Bell: “Every day, if you are looking online, the market in the city (CBD) has been flooded with apartments for rent.”
“I know that the short-term letting agents are not offering rental guarantees at the moment, and those investors are definitely getting hit at the moment. However, properties that we purchased for clients 30 to 60 days ago, which have been settling throughout the peak of the COVID-19 crisis, have all secured quality tenants in a short space of time.”
Ultimately, most buyers who have been looking to buy in Brisbane recently have not actually left the market.
Property experts expect some pent-up demand as the pandemic outcome becomes more certain, and this will be fuelled by record-low interest rates, strong gross yields that are achievable in Brisbane, as well as huge government stimulus to get the economy moving again.
“The weeks and months ahead will uncover exactly where we are heading, but for now, based on our “on-the-ground” research, the property market in Brisbane seems to be relatively stable,” Brisbane-based property professional Melinda Jennison concluded.