This Week in Real Estate: Property news that you can trust
Investor Optimism On The Rise
ME Bank’s latest Quarterly Property Sentiment Report shares an improvement in investor sentiment, with falling confidence among home-buyers.
According to the report, the second quarter of 2021 saw residential property market decline to 42% from its previous 49%, a record-high, in the first quarter. As for investors, the highest level of positive sentiment recorded is at a whopping 52%.
Claudio Mazzarella of ME Bank believes that sentiment trends have changed following the rapid rise of the property market post-pandemic.
Mazzarella explains that the fall in prices in some cities in 2020 created an opportunity for first-home buyers, while many investors became nervous. But now that prices have rebounded, and with affordability going down, the trend has shifted and first-home buyers are no longer as positive, while investors have become more active.
The drop in available properties is one of the main contributors in this shift. Meanwhile, 60% of respondents believe that there isn’t enough choice in the current market.
Regional Market Doubles Cities Growth
The biggest beneficiary of the booming market is regional Australia with price rises averaging 13% over the past 12 months. According to CoreLogic’s Regional Market Update, this was double the growth rate in capital cities where price gains averaged only 6.4%.
According to SQM Research, house prices nationally have risen 12.7% in the past year, but only 5.6% in the combined capital cities. This confirms the biggest growth is in the regions.
The CoreLogic report says Richmond-Tweed in NSW, (which includes Byron Bay and Lennox Head), have taken the top spot for capital gains for both houses (at 22%) and units (at 15.5%).
Tim Lawless, research director of CoreLogic says “This can partly be explained by the ongoing popularity of remote and flexible working arrangements, but also increased demand for lifestyle properties and holiday homes”.
According to ABS figures, a net 43,000 moved to regional areas from capital cities in 2020. This is the largest net inflow to the regions since the series began in 2001.
Global Price Rises Defy Covid
Residential real estate prices, all across the world, are rising.
Not too long ago, real estate experts have voiced out their concerns about the worst of times for the industry. Last year’s pandemic had sent the world into lockdown, shuttering businesses, causing millions of people their jobs, and putting housing markets into a deep freeze. Along with that, lenders have been asked by an increasing number of people, to put a pause on their mortgage payments.
The fear was that house prices would collapse along with the rise in unemployment. This would make it hard for home-owners to pay the mortgage, while those who own second homes would need to sell.
Unexpectedly, house prices have soared even as the world faced its worst slump since the Great Depression. From New Zealand to the US, Germany, China and Peru, the same phenomenon has taken hold: prices are indeed rising.
Real house prices rose 7% in 2020 among the 37 wealthy countries that make up the OECD. This is the fastest year-on-year growth the past two decades has seen.
Renovation Spend Hits Record
The number of home alterations are at record highs with Australians spending $1 billion per month on renovations in a boom partly fuelled by government stimulus.
2,050 private residential renovations in NSW were approved in March and valued at a total of $354 million. This is another increase from the 1,850 approved in February.
Based on ABS figures going back to July 2016, this was the first time the value of renovations approved in NSW in a single month topped the $300 million mark.
Across the nation, the same data set shows home renovation values approved each month passed the $1 billion mark for the first time in February. This then grew to $1.14 billion in March. In 2019, the monthly average was $680 million.
In Victoria alone, there were 3,062 additions and alterations approved in March. This is another record worth $373 million. In Queensland, 3,352 approvals were reported amounting to $255 million.
Clearances Remain Close to 80%
Clearance rates remain close to 80% last week, while auction volumes were slightly down.
Across the combined capital cities, a total of 2,892 homes were auctioned. This is in comparison to the previous week’s 3,016.
Preliminary results indicate a 79% success rate, while the preliminary clearance rate for the previous week was 78%, which was revised down to 77.2% in final figures.
The standout performer, Sydney, had auction volumes remaining steady while the final clearance rate held above 80% for 13 of the past 14 weeks.
The number of homes in Melbourne that were taken to auction fell but the reported success rate was up at 77.6% from the previous week’s 74.1%.
Canberra presented the best preliminary rate with 88%, while the number of reported auctions in Perth was similarly successful at 60%.
The regions, having proven to be extremely popular to migrating house hunters during the pandemic, had sold out every property in Newcastle and Lake Macquarie when they were put to auction.