How does an economist view Labor’s housing plans?
Saturday’s (21 May) federal election brought with it a new government, with the Albanese-led Labor party winning power...
The second wave of COVID-19 outbreaks have wreaked havoc, but real estate continues to show resilience, according to a number of market indicators.
According to CoreLogic’s latest Property Pulse – and a number of housing market indicators – many Australian regions have proved more resilient this year than last, despite head of research Eliza Owen conceding that “not all pockets of the housing market remain robust”.
The question remains: Are we faring better in 2021 than we were in 2020?
Ms Owen shared the indicators of housing market performance that have seen dramatic changes over the past 18 months.
1. Consumer sentiment see ‘shallower’ decline
Based on figures from ANZ-Roy Morgan, consumer sentiment declined 40.1 per cent through early 2020, during the first lockdowns. This lasted six weeks.
In contrast, the current wave of lockdowns has so far seen a peak-to-trough fall in consumer sentiment that has lasted seven weeks, with a decline of by 12.3 per cent.
According to Ms Owen, consumer confidence has been more resilient now given that they have more information “about the economic impact of lockdowns, and importantly, the strong recovery trend that followed stage 2 restrictions last year”.
“Interestingly, the ANZ-Roy Morgan index seems to have stabilised above 100, which indicates more people are providing favourable answers to questions around economic and financial conditions.”
2. Sales activity continues decline, but not as much as last year
This was largely attributed to restrictions that made transactions harder to carry out, as well as low levels of consumer confidence and high percentage of job loss, Ms Owen said.
This time around, despite the continued presence of social distancing restrictions, other factors have made for a more conducive environment for sales, including higher household savings, lower interest rates and an improving jobs sector, she explained.
In fact, the decline in sales volumes have become much milder, with the month of July seeing only a 3.7 per cent fall in Sydney.
However, Ms Owen warned that sales volumes are likely to continue falling further the longer the lockdowns persist.
3. Fall in stock has been milder
The decline in newly advertised stock has also been more subdued in 2021, with about 1,350 properties added to the Sydney market for the week ending 29 August – just 23 per cent lower than the five-year average pre-COVID.
“Assuming new listing volumes continue to climb, this marks a peak-to-trough decline of 37.5 per cent of new listings added to market since the onset of the Sydney lockdowns, compared to a peak to trough decline of 52.4 per cent through restrictions in early 2020,” Ms Owen explained.
Melbourne, in comparison, recorded a steeper decline in new listings since August, but the Victorian capital “has also seen more volatility because lockdowns have been more frequent,” the researcher added.
On average, weekly new listings across Melbourne (1,765) have actually been higher than in Sydney (1,577), and are higher than the average weekly listings added across Melbourne through 2020 (1,345).
4. Sydney and Melbourne auction results are “diverging”
Despite being in lockdown since June, Sydney auction results have remained high, with clearance rates averaging 75.9 per cent through to late August and volume of properties clearing averaging 474 per week – the highest average weekly auction sales for the period since 2015.
In contrast, Melbourne has been showing more struggle on its sixth lockdown, with auction clearance rates averaging only 59.4 per cent.
According to Ms Owen, the low clearance rate across Melbourne could be attributed to the high withdrawal rates across high volumes of scheduled auctions.
“From the 5th to the 22nd of August, it is estimated around a third of properties scheduled to go to auction have been ‘withdrawn’, which means the auction has essentially been cancelled rather than postponed. The property may be listed instead by private treaty, or not be sold,” she said.
“It is important not to dismiss the portion of auctions withdrawn as merely ‘distorting’ the clearance rate, because it does reflect a loss in demand and vendor confidence.”
Withdrawn auctions could be the result of the continued prohibition of in-person inspections in Melbourne, which does not exist in Sydney anymore, the researcher commented.
But looking at just the number of properties sold at auction each week, Melbourne still stands strong – recording a higher number of successful results than Sydney for eight of the past nine weeks.
While the general consensus appears more positive, Ms Owen has highlighted that not every pocket of the property market will be impacted in the same way as lockdowns continue to be extended.
According to her, the diversity of the population across large cities like Sydney and Melbourne means the impact on consumer confidence is not entirely uniform.
“For example, about a third of the employed Australian workforce was working from home in the second half of 2020. Across particular industries – such as financial and insurance services; information media and telecommunications; professional, scientific and technical services; and rental, hiring and real estate services – an average of five or more days of work was being conducted from home.
“However, industries such as food and accommodation have not only seen workers largely unable to conduct work from home, but are far more likely to have lost work through each lockdown period,” she explained.
Across the North Sydney and Hornsby region, about 40 per cent of employed people could be more likely to conduct work from home, which means COVID restrictions pose less disruption to income across the region.
“This data does highlight that there are geographical differences in the extent to which remote work can be conducted through lockdowns, which could see varied performance in different housing markets.”