Australian property market update - July 2020

According to the latest CoreLogic home value index, Australian property prices have eased in July falling 0.6 per cent - a small improvement from the 0.7 per cent fall recorded last month. 

Although this month marks the third consecutive month of declines, national home values are still 7.1 per cent higher over the year.

National property values: July 2020

All eyes are on the country’s two largest property markets of Sydney and Melbourne as increased Victorian Covid-19 cases weigh heavily on consumer confidence. 

Melbourne led the falls in home values over July with property prices falling 1.2 per cent over the month. 

Property value declines in all other capital cities however remained under 1.0 per cent with Sydney recording a 0.9 per cent decrease followed by Perth with a decline of 0.6 per cent. Canberra and Adelaide on the other hand are the best performers, both reporting positive growth over the month. 

Over in our regional markets, property values are showing more resilience than our capital cities with combined regional prices unchanged in July. 

CommSec's Senior Economist Ryan Felsman observes that "Regional home prices may continue to outperform capital cities in the near-to-medium term as Aussies work remotely and seek lifestyle locations in rural and beachside towns during the pandemic."

Despite declines in six of our capital cities, CoreLogic’s Head of Research, Tim Lawless said that the housing market has so far performed better than expected throughout the pandemic. 

 "Regional home prices may continue to outperform capital cities in the near-to-medium term as Aussies work remotely and seek lifestyle locations in rural and beachside towns during the pandemic."

“The impact from COVID-19 on housing values has been orderly to-date, with CoreLogic’s national index falling only 1.6 per cent since the recent high in April and housing turnover has recovered quickly after it’s sharp fall in late March and April.” 

“Record low interest rates, government support and loan repayment holidays for distressed borrowers have helped to insulate the housing market from a more significant downturn.” He said. 

“Advertised supply levels have remained tight, with the total number of properties for sale falling a further 4.3% in the 4 weeks to July 27th, sitting 15.2 per cent below where they were this time last year. 

“Additionally, increased demand driven by housing specific incentives from both federal and state governments, especially for first home buyers, have become more substantial.”

Although total listings on the market are 15.2 per cent below last year’s levels, the number of new listings have been ramping up and are now 46 per cent higher from the lows seen in early May. 

Louis Christopher, Managing Director of SQM Research describes this uplift as “somewhat abnormal” as typically falls are recorded during the winter months. Mr Chrisptopher suggests that this could be generated by the lifting in restrictions over May and June, enticing sellers to the market. 

This rise in new listings could also mean that homeowners have become more willing to test the market. The diverging trend between new and total listings numbers also suggests that properties listed for sale have been quickly absorbed by buyers.

Sydney and regional NSW

In Sydney, home values are down 0.9 per cent over the month bringing the median value to $866,110. Over the past three months, prices are down 2.1 per cent but are still in double digit growth at 12.1 per cent over the year. 

CoreLogic Head of Residential Research Australia, Eliza Owen told Domain that she has generally seen an acceleration in the rate of decline for Sydney and Melbourne due to their reliance on overseas migration. Sydney received the second highest volume of net interstate migrants over 2018-19.

“I don’t see how Sydney and Melbourne can avoid an acceleration of their downturns right now, while international borders are still closed,” she said.

The most expensive markets in Sydney continue to lead the downturn with the top segment of the market down 2.5 per cent over the past four months, while the most affordable segment of the market is virtually flat at - 0.1 per cent. 

Mr Lawless explains that this trend is common with current market conditions. “Higher value markets tend to be more reactive to changes in the economic environment, having led both the upswing and the downturn over previous cycles. The Covid related downturn has seen this trend playing out,” he said. 

The latest figures released by SQM Research show that property listings in Sydney have increased 8.7 per cent over the month and 10.7 over the year. 

Louis Christopher, Managing Director of SQM Research comments that the increase in seller activity could be due to eased restrictions. 

“This could have been generated by the lifting in restrictions over May and June, enticing sellers to the market,” he said. 

Regional NSW property prices

In regional NSW, property prices performed well, up 0.5 per cent over the month to $468,220. 

Both regional houses and units are seeing positive growth over the short and longer term with regional houses climbing up half a per cent in July, 0.6 per cent over three months and up 2.9 per cent over the year. 

Regional units have performed similarly, up 0.5 per cent over the month, 0.8 per cent over three months and 2.6 per cent over the year.

Melbourne and regional VIC

Melbourne property prices have seen the greatest price declines over the month of 1.2 per cent. Over the past three months, Melbourne home values are down 3.2 per cent however are up 8.7 per cent over the past year. The current median value of a home is $678,334. 

The move to stage four restrictions in Melbourne will no doubt have a significant impact on the real estate industry with consumer sentiment and auction clearance rates already taking a notable hit. 

CoreLogic Head of Residential research Australia Eliza Owen told Domain, “The restrictions will see a more immediate shock to transaction activity; already we’re seeing more properties withdrawn from auction, we’re seeing fewer new listings coming onto the market and fewer reports generated for real estate agents [for properties which may come onto the market],” Ms Owen said.

CommSec Senior Economist Ryan Felsman says that with Victoria's new restrictions, it is likely that Melbourne auction clearance rates could return to levels seen in April of around 20 per cent or lower. 

The most expensive end of the market continues to lead the downturn in Melbourne with the latest figures showing the top end of the market down 5.2 per cent over the past four months. The lower end of the market however had significantly more modest declines of 1.2 per cent. 

When looking at new listings, figures released by SQM Research reveal that for Melbourne, there was an increase in new listings of 5.9 per cent over the course of July. Looking year-on-year, July 2020 had 20.7 per cent more listings than in July 2019. 

Louis Christopher, Managing Director of SQM Research said that a reading with significant rises is normally associated with a weakening market. Mr Christopher adds that “dwelling prices are falling. Not crashing to date, per se” 

“In light of the unprecedented restrictions placed in Melbourne, our expectation is that more price falls can be expected in coming months.” 

Regional VIC property prices

In regional Victoria, property prices are also on a downward trend with properties overall recording a 0.5 per cent decline bringing the median value to $391,716. 

Both regional houses and units have experienced a slide in prices with regional houses down 0.5 per cent over the month, 1.0 per cent over the last three months but still up 2.4 per cent over the year. 

Regional units have performed slightly better with a subtle 0.1 per cent decline over July, 0.4 per cent increase over the last three months and up 2.7 per cent over the year. 

Read: Real estate and Covid-19 in Victoria: FAQ’s

Brisbane and regional QLD

Over July, Brisbane property prices experienced a moderate decline of 0.4 per cent with the median value of a home now at $502,167. Over the past three months, prices have fallen a little further at 0.9 per cent however over the year, home values are still up 3.8 per cent.

The Queensland Government recently announced it will close its borders to all of NSW and the ACT from 1am Saturday 8 August as the state recorded one new case of Covid-19 overnight. 

Queensland Premier Annastacia Palaszczuk described the closure as “a life and death situation.”

Limited exceptions will be available for those along border communities who need to pass between NSW and Queensland. Find out more on the Queensland Government website here.

Regional QLD property prices

In regional QLD, property prices remained quite stable over the month posting a slight increase of 0.1 per cent. The median value now sits at $382,408. 

Both regional house and unit values have been steady with regional houses posting a 0.1 per cent increase over July, a decline of 0.3 per cent over the past three months but still up 2.2 per cent over the year. 

Regional units performed similarly with figures unchanged over the month, up 0.3 per cent over the past three months and up 2.2 per cent over the year.

Hobart and regional TAS

Over July, declines in property prices have been mild at 0.2 per cent. Over the past three months, home values have increased by 0.9 per cent and over the year, prices are up 5.9 per cent. The median value of a home in Hobart currently sits at $486,771. 

Hobart house prices declined 0.4 per cent over the month but over the year values are still in positive territory, up 3.0 per cent. 

Hobart unit prices on the other hand increased 0.6 per cent in July but over the year show a 0.6 per cent decline.

Regional TAS property prices

In regional TAS, property prices have been faring quite well with a 0.3 per cent increase over the month. Over the past three months, regional Tasmanian homes are up 1.4 per cent and over the year, up 6.4 per cent. 

Looking at houses and units separately, regional TAS houses were up 0.2 per cent in July, 1.5 per cent over three months and up 6.0 per cent over the year. This is the highest year-to-date growth of all the state regions. 

Regional TAS units are performing equally well, up 0.3 per cent over the month, 0.6 per cent up over the past three months and up 9.8 per cent over the year - also the highest of all the state regions.

Canberra and the ACT

Canberra was the only capital city along with Adelaide to post positive growth over the month. 

Canberra was the best performing capital city with home values up 0.6 per cent bringing the median value to $641,360. Over three months, property prices in Canberra have grown 1.3 per cent and 7.2 per cent over the year. 

CoreLogic Head of Residential Research Australia Eliza Owen described Canberra as “the most resilient market.” 

Eliza Owens told the ABC, "I think that's a reflection of the fact that you've had relatively low cases across the ACT, relative job stability and of course a lot of necessary jobs in the public service."

Adelaide and regional SA

Adelaide was one of just two capital cities that recorded growth over the month of July, stepping 0.1 per cent up. Looking over three months, property growth has increased 0.3 per cent in Adelaide and 2.4 per cent over the past year. The median home is now $441,826. 

CoreLogic Head of Residential Research Australia Eliza Owen said that better performing cities benefited from low coronavirus numbers but also eased social distancing restrictions. 

Ms Owen stated that Adelaide was a relatively slow and steady market, with traditionally lower transaction and investor volumes.

Regional SA property prices

Regional SA was the top performer over the month of July, posting the highest overall growth of all the state regions at 1.0 per cent. 

Over the past three months, prices are up 1.6 per cent and over the year, up 4.0 per cent. The median value of a home in Regional SA is currently $245,527. 

Both regional SA houses and units reported growth over the month, with units gaining an impressive 3.3 per cent.

Perth and regional WA

Houses

$455,813

Monthly change: -0.6%

Units

$352,959

Monthly change: -0.8%

Over the month, Perth property values have declined a moderate 0.6 per cent, bringing the median price of a home to $439,092. 

Over the past three months, prices are down 2.2 per cent and on an annual basis, around 2.3 per cent lower than they were last year. 

The latest REIWA data shows that sales volumes in perth metro regions are up 68 per cent compared to April. 

REIWA President Damian Collins said whilst sales activity was quiet during the initial stages of the COVID-19 lockdown restrictions, it’s great to see levels pick back up to where they were before the pandemic hit.  

“While there are no surprises with the increase in land sales for the month, which saw a 121 per cent increase compared to April, it was pleasing to see that both houses (up 58 per cent) and unit sales (up 51 per cent) also saw a significant increase,” Mr Collins said.  

Suburbs with the most notable increase in sales activity compared to June are Byford (92 per cent increase), Port Kennedy (up 88 per cent), Quinns Rocks (up 50 per cent), Heathridge (up 42 per cent) and Banksia Grove (up 38 per cent).

Regional WA property prices

Houses

$312,720

Monthly change: -3.0%

Units

$178,316

Monthly change: -6.6%

Over the month, Regional WA properties posted the highest decline of all the state regions at 3.2 per cent. Over the year, Regional WA properties are around 4.4 per cent lower bringing the median value to $299,938.

Darwin and regional NT

Houses

$466,959

Monthly change: -0.2%

Units

$267,948

Monthly change: -0.7%

Over July, Darwin property prices have experienced a mild decline of 0.3 per cent. Over the past three months, values have declined 1.6 per cent and 2.2 per cent over the year. 

The median price for a Darwin property currently sits at $384,533. 

Darwin house prices drifted down 0.2 per cent over the month but are still 3.3 per cent higher than it was the same time last year. 

Darwin units edged lower 0.7 per cent in July and 4.2 per cent over the year. 

Regional NT property prices

Houses

$399,925

Monthly change: +1.3%

Units

$ n/a

Monthly change: n/a

In regional NT, house prices were up 1.3 per cent over the month, up 3.0 per cent over the past three months and down 0.6 per cent over the past year. 

No data was available for regional NT units.

Rents and rental yields

Rents have continued to trend lower through July with the unit sector driving the largest falls in Hobart, Sydney and Melbourne. 

Since March, capital city house rents have declined only 0.3 per cent while units have dropped a more significant 2.6 per cent during the same time period. 

For both houses and units, Hobart stands out as the capital city recording the greatest declines with rents for houses down 2.0 per cent and units 4.4 per cent. 

CoreLogic’s Ms Owen comments, "The market that's leading the declines at the capital city level is Hobart, where we've seen a lot of people across tourism and hospitality lose their jobs, we're not seeing as much visitation to support incomes, and unit rents are down 4.4 per cent across Hobart since the start of the pandemic." 

Sydney house rents saw a 1.1 per cent decline and unit rents a 3.2 per cent drop. Melbourne rents experienced similar figures of 0.7 per cent fall for houses and down 3.1 per cent for units. 

Weaker rental conditions are most evident in those markets where rental demand has been impacted by border closures and supply additions. 

According to Mr Lawless, weaker rental conditions are most evident in those markets where rental demand has been impacted by border closures and supply additions. 

“Some inner city areas of Melbourne and Sydney have seen rental listings more than double since March due to the combined effect of temporary migrants departing, and overseas arrivals, including foreign students, stalling. Compounding this weak demand position is the surge in construction activity and investment over previous years, which has added to inner city rental supply.”

Perth and Adelaide are the best performing capital city rental markets with Perth and Adelaide house rents up 1.5 and 0.5 per cent respectively. 

In our regional markets, regional SA has been a stand out with house rents up 3.3 per cent since March. For units, regional TAS is the best performer with rents up 2.5 per cent. 

The current national rental yield sits at 3.7 per cent for houses and 4.1 per cent for units. 

What does this mean for the Australian property market? What is the outlook for the months ahead?

While the current decline in home values have been orderly and modest in most areas, the true test of the market’s resilience will come as the Government tapers off fiscal support in October and repayment holidays expire at the end of March next year. 

Mr Lawless comments that once support is removed, it could lead to an increase of distressed properties coming onto the market.

“As stimulus measures wind down and borrowers taking a repayment holiday face up to their debt, it's logical to expect a rise in distressed properties coming onto the market.”

Ms Owens echoes this sentiment on the potential rise of new listings early next year. 

"What happens to listings really depends on where we are economically by the time these mortgage repayment holidays taper off," she said.

"If the economy's in a better place and people have recovered [from] job and income loss, then we probably won't see a surge of listings come to market, if there is still a lot of strain in the economy then I'd imagine we would see a little bit of an uplift in new listings."

"Outside the two capital cities, the market is more balanced and indeed we are seeing an increase in demand for housing across regional Australia.”

In terms of house prices Mr Lawless points out the biggest risk to the Australian property market. 

“The recent concerns of a second wave of the virus and the potential for renewed border closures and stricter social distancing policies are likely to further push consumer sentiment down. This is likely to weigh on both home buying and selling activity more broadly.” he said. 

Louis Christopher, Managing Director of SQM Research weighs in commenting that further price falls will most likely be in our two largest markets. 

“In light of the unprecedented restrictions placed in Melbourne, our expectations are that more price falls can be expected in coming months. Outside the two capital cities, the market is more balanced and indeed we are seeing an increase in demand for housing across regional Australia.”

What does this data mean for you?

Remember that while data can be insightful, you need to take any high level numbers with a grain of salt. It’s really important to do local research if you are looking to buy or sell. While high level indices give a great snapshot of what is happening nationally, in capital city markets and regionally, they don’t give great insight into what is happening at the post code level.

Market conditions will vary from suburb to suburb, and the value of your home is not only impacted by location, but also by property type and price point. While there may have been price drops in your city, there are still markets within cities where performance is above average. 

Maintaining perspective is important too. If price drops have been a reality in your suburb over the past couple of months, look at values over the past year. In many cases, home owners are still ahead when it comes to value growth.

We need to remember that a city like Sydney, Melbourne or Brisbane is a very big place, filled with a huge cross-section of different markets, as well as markets within markets, so a high level data point about sliding property values should be dissected with a degree of scrutiny.

For advice around the biggest market indicators that impact price growth, you can download this helpful guide.