Six months in: How are house prices faring?

Six months in: How are house prices faring?

Forecasts and predictions that the pandemic is going to push real estate prices off a cliff have not yet eventuated – and many experts believe that suggestions of huge property price falls are overblown. What does the data say?

We’re six months into the COVID-19 pandemic, and so far Australian property markets have weathered the economic storm quite well.

The data shows that median property values are starting to slowly trend down, but we’re nowhere near experiencing the 10%, 20% or even 30% drops that some industry experts predicted.

But are those price falls still to come?

The most recent data suggests that, if we continue on the current course, Australian real estate prices are set to continue down a path of resilience.

The RPM Real Estate Group’s latest quarterly Residential Market Review suggests that government stimulus packages and grants, particularly the HomeBuilder incentive introduced in early June (which offered $25,000 to anyone buying a new home), may have thrown the property and construction industry a lifeline – and could be responsible for putting a floor under the market going forward.

In Melbourne, more than 50% of the quarter’s 3,786 total lot sales across Greater Melbourne and Geelong occurred in June, of which 69% were titled or near-titled lots, demonstrating the grant’s effectiveness at bringing forward buyer demand for eligible lots.

The June figures topped out at 2,043 lots, reflecting the strongest monthly sales result since November 2017 and contrasting deeply with the 654 lot sales recorded in April – the weakest result since the market hit the bottom in April 2019.

“The way that people work will likely change significantly post-pandemic, and this will have an impact on less traditional property investment locations” Peter Koulizos, chairman, Property Investment Professionals of Australia

“During April we felt the crunch of social distancing restrictions, with a stark shift in spending patterns and wide-felt uncertainty across the workforce. Understandably, land sales stalled and the rental and apartment markets were heavily impacted too,” says RPM chief executive Kevin Brown.

“We saw lot sales steadily climbing to pre-pandemic levels through May, demonstrating underlying buyer confidence in Victoria’s property market, before activity really started escalating from early June with demand shifting notably to titled or near-titled lots.”

Brown says HomeBuilder made a marked difference to sentiment, and he welcomed the recent blanket extension of the grant across Victoria by three months, meaning that applicants now have six months from the time of signing an eligible contract to commence construction. However, he warned that a sudden drop-off in activity loomed large without further government intervention and suggested that a minimum six-month extension of the grant’s current contract and build timelines would help even out demand through the remainder of 2020 and into 2021.

It’s a sentiment echoed by Denita Wawn, CEO of Master Builders Australia (MBA), who says a strong building and construction industry is essential to a strong economy, and vice versa.

“In the Australian economy there is no industry with a bigger economic multiplier effect than building and construction. There is also no larger provider of full-time jobs and there is no other industry with as many small businesses; that is why we are seeking stimulus measures across the entirety of the residential, commercial and civil construction sectors,” she explains.

MBA is calling for a 12-month extension of HomeBuilder, among other things, to drive sustainable demand for new housing over the next 18 months.

In the short term, new housing activity remains robust, and while it’s impossible to predict where property markets might go from here, we can take a look at how markets have performed historically to get an idea of where they may be headed.

New research from Property Investment Professionals of Australia (PIPA) and CoreLogic, for instance, has identified the best-performing capital city and regional locations three years after the onset of the GFC.

The research and analysis, a joint initiative of PIPA and CoreLogic, found that capital city dwelling values increased by up to 39% over the three years from the end of December 2008.

This was just as government stimulus was ramping up, according to PIPA chairman Peter Koulizos, who says the capital city results showed a mix of inner- and outercity suburbs, with six of the top performers being in Sydney.

“The dominance of Sydney in the results shows that nobody rings the bell to tell you when the upward swing of a property cycle has started,” he says.

“When you do hear it, it’s too late because it’s already begun. I say this because most people believed that property prices in Sydney only started firming a year or so later – in 2012 – when it was already underway but perhaps masked by the continued economic uncertainty around the globe.”

Across the country, Koulizos says the individual performance of each capital city was varied in terms of where the top-performing suburbs were located. In Melbourne, the best performers were inner-city areas, while in Adelaide it was homes located in outer suburbs that experienced stronger growth.

During the same period of time, the number of first home buyers also hit historic highs, because of the federal government’s First Home Owner Boost.

“The recovery in the property market was broad, varying from inner-city to outer-city suburbs, and certainly first home buyers helped by boosting demand for new properties, whether they were located in urban regeneration or greenfield sites,” Koulizos says.

CoreLogic head of research Tim Lawless adds that dwelling values in regional areas increased by up to 65% over the period, with mining areas in particular performing well, given that the resources sector was firing on all cylinders at the time.

“Areas such as mining towns, where economic conditions are dependent on a single industry, are much more likely to experience bursts of price rises or falls because of the strength or weakness of their dominant industries,” he explains.’

Areas such as mining towns, where economic conditions are dependent on a single industry, are much more likely to experience bursts of price rises or falls” Tim Lawless, head of research, CoreLogic

“While many of these mining regions recorded spectacular capital gains post-GFC, a few years later many of these same regions recorded a crash in home values.”

While the research shows the resilience of property prices during turbulent times, and Koulizos says prices are expected to stand firm over the medium term this time around, he cautions that the best-performing locations “may be very different to what has occurred in the past”.

“The way that people work will likely change significantly post-pandemic, and this will have an impact on less traditional property investment locations,” he says.

“Lifestyles will undoubtedly change, which will make living outside the inner city more appealing. If you don’t have to go to the CBD every day for work, because you can work from home, then you don’t have to live near it.”

How this will impact the spring selling season, which is traditionally the busiest season for property markets, is unpredictable.

Andrew Bartolo, ME general manager home loans, says the property market “notoriously blooms in spring” with a flurry of listings and buyers preparing to pounce.

“But this season will be different: the property market will be quieter due to the impact of COVID-19, particularly in Melbourne. Despite some more listings this spring and record-low interest rates, economic concerns will dampen demand,” he says.

“Plenty of challenges remain, including high levels of unemployment, job insecurity and lower immigration, impacting people’s willingness to transact in property. Many Australians are also on home loan repayment pauses, and the gradual end of this type of support will be a critical juncture for the property market going forward.”

In terms of demand, buyer activity is expected to be lower overall than in previous spring buying seasons, Bartolo says, although buyers are still there and have a strong appetite for potential bargain buys.

“ME has seen an influx of first home buyers and expects this to continue. Potential for price falls and reduced investor activity, together with historically low interest rates and government support, are propelling first home buyers into action,” he says.

Potential for price falls and reduced investor activity, together with historically low interest rates and government support, are propelling first home buyers into action” Andrew Bartolo, general manager home loans, ME

“The fallout of the COVID-19 pandemic and lockdowns has caused a short supply of stock. However, this spring we may see an increase in listings come onto the market. I don’t foresee new stock overwhelming current demand, but certainly, anyone listing will be met with a high degree of enquiry.”

Bartolo backs up Koulizos’s sentiments that the pandemic may prompt a more wholesale shift in priorities when it comes to homebuying trends, with proximity to your place of employment no longer as important as it once was.

“COVID-19 has led to a  reassessment of life priorities.  According to ME’s latest Quarterly Property Sentiment Report, 45% of respondents said they were more likely to consider buying in a regional area to save money and improve their lifestyle – rising to 60% of first home buyers,” Bartolo explains.

“New remote and flexible working arrangements have made buying in  regional areas a more feasible and affordable lifestyle option, and as such we may start seeing more  buyers making their move this spring.”

 

Australian Broker, National, 30 September 2020

Property investors remain upbeat

Property investors remain upbeat

The majority of property investors have remained upbeat during COVID-19, however the pandemic has made them reconsider not only where they buy, but also where they live, the 2020 PIPA Annual Investor Sentiment Survey has found.

The national annual survey, which gathered insights online from nearly 1100 property investors during August, found that investors remained optimistic about the months ahead.

“While there is no doubt that 2020 has been one of the toughest in living memory for everyone around the globe, property investors have remained resilient in the face of the unprecedented uncertainty that we are all experiencing,” PIPA Chairman Peter Koulizos said.

“Indeed, about 67 per cent of investors believe that now is a good time to invest in residential property, according to the survey, which is down from 82 per cent in 2019 and no doubt a direct impact of the pandemic.

“However, at the current time, the property market has continued to show its resilience with prices materially stable in most parts of the nation,” he said.

Some 77 per cent of investors say any concerns about potential falling house prices won’t cause them to put their investment plans on hold, the survey found.

Mr Koulizos said about 44 per cent of investors are looking to purchase a property in the next six to 12 months.

“Plus, about 71 per cent of investors have indicated that the pandemic has made it less likely they will sell a property over the next year, which is another factor that will help to underpin property prices,” he said.

Investors are open to moving to other locations post-pandemic with regional areas set to benefit the most.  Lifestyle factors and working from home the most common  reasons.

The survey found that more than 40 per cent of investors intend to buy property in a different state or territory to the one that they live in. Mr Koulizos said interstate investing had been growing in popularity over recent years as investors become more educated about the strategy.

“Investors are recognising the value of working with property investment professionals to help them secure the best opportunities across the nation,” he said.

While the majority of investors remain keen to push forward with their investment plans over the next year, this year’s survey also found they are considering buying, as well as living, in different locations. More than 17 per cent of investors indicated that the pandemic had made them consider moving to another location, with regional areas set to benefit the most, according to the national survey.

“It’s no surprise that COVID-19 and made many people reconsider their lifestyles with nearly one-fifth of investors indicating they are contemplating a move,” Mr Koulizos said.

“The survey found for those investors considering relocating the main reasons for doing so were improved lifestyle factors (78 per cent), working from home in the future (46 per cent) and housing affordability (40 per cent), and it seems that regional locations are set to benefit from plenty of new residents with investors indicating their top locations to migrate to are regional NSW (21 per cent), regional Qld (18 per cent), Brisbane (16 per cent) and regional Vic (14 per cent).”

The survey found that Queensland is definitely in the sights of investors, with 36 per cent saying it offers the best investment prospects over the next year, followed by Victoria (27 per cent) and New South Wales (21 per cent).

The number of investors who see Brisbane as the state capital with the best investment prospects has fallen to 36 per cent, down from 44 per cent in 2019.

However, Brisbane continues to be seen more positively than Melbourne at 27 per cent, the same as last year, Sydney at 18 per cent, up from 14 per cent, and Adelaide on eight per cent, up from seven per cent.

Perth has increased slightly in appeal (six per cent versus four per cent last year), while Canberra is up to two per cent from one per cent last year. Hobart is the top pick for two per cent of investors while Darwin is in favour with only 0.2 per cent.

 

Yea Chronicle, Yea, 30 September 2020

 

How COVID has killed off ‘local investing’

How COVID has killed off ‘local investing’

If there’s been a silver lining among 2020’s challenges, it’s that humans have discovered a talent for adaption.

It’s been all too easy to become entrenched in habits when we’re feeling safe in our environments. We choose to do things the way we’ve always done them, because we’re used to the process and can proceed with a relatively ‘ risk-free’ outlook.

We also like to cling to the familiar in times of catastrophe too, but this crisis has been different.

To remain relevant, keep our heads above water and move forward, we’ve all needed to leave our comfort zones across work, family or social interactions.

The same has applied to our property dealings.

For decades, there’s been a tendency to stick with what we know in the property investment realm, but COVID has made in plain that this sort of thinking just won’t hold up any longer.

So, we’ve had to adapt and survive.

From open home and auction event cancellations to Zoom meetings and virtual inspections, buyers and sellers have found ways to keep dealing property.

And somewhat ironically, while you couldn’t cross the border physically, being a borderless investor has never been easier.

Everything has changed

What a huge number of Aussie investors have discovered as a result of COVID is they can invest safely well away from where they live.

And given the concentration of population in and around Sydney and Melbourne, that means a swath of potential landlords looking away from those two hotbeds of high density.

I think it’s become a real shift in our collective psyche’s. We’ve discovered its possible to work remotely and stay productive, relate remotely and keep our social connections alive. Best of all, there’s a realisation we can invest remotely and not only stay the course but, in fact, speed up the ship.

Recently I saw the results of a study by MCG Quantity Surveyors which showed that even before COVID more people were investing away from where they live.

According to their numbers, Australian-based investors had an average distance of 300 kilometres between investment properties and their home addresses – and 30 per cent of those studied were investing more than 200 kilometres from home.

That’s a substantial proportion and COVID has cemented this trend.

Easy remote due diligence

The veracity and accessibility of remote research, as well as the connectivity to well-informed independent advisors in your area of interest is at an all-time high.

It’s just not that difficult to access nation-wide data on markets… and quite a bit of it is free. From median prices to listing numbers, suburb level analysis is just a few clicks away.

And when it comes to actively seeking an investment, local experts are on hand nowadays and don’t require an in-person meeting to get the job done. You can secure area-specific legal advice, town planning assistance and buying and building expertise no matter where you live across the country.

Property investment really has become a national industry. No location is off-limits.

Unemotional decisions

Another element in this mix is that buying out of area actually demonstrates the investing smarts to follow your head, not your heart.

Being unemotional when investing is essential – it must be based on hard data around sustainable rent return and capital growth projections. There’s no guarantee the buyer of your home will pay an ‘emotional premium’ when you eventually sell.

And this year has delivered excellent dividends for those willing to look beyond their home patch.

As an example, if you were a Melbourne local who chose to invest in Brisbane at the start of 2020, you’d be sitting on capital growth of about 1.4 per cent according to CoreLogic. Better yet if you’d drilled down into number at a suburb level, you would have achieved even more with, say, Bridgeman Downs has seen a three per cent increase in its median house price on realestate.com.au during the year.

If, however, you’d stayed local and bought in Melbourne ‘because that’s where you live’ CoreLogic indicates you’d have seen a 2.5 per cent fall in your asset’s value over the year to date.

Yes – this is a small snapshot, but it shows that buying an investment where you live isn’t always the smart choice. As we all become more comfortable with distance investing, expect to see activity ramp up.

2020 will be the start of a new wave of cross-border buying, and by making sure you rely on advisors who use unemotional analysis and their local networks, the ability to take advantage of the best possible investment, regardless of its location, is well within your reach.

 

Richard Crabb, ASPIRE Property Advisor Network, 25 September 2020
https://www.aspirenetwork.com.au/how-covid-has-killed-off-local-investing/

 

Outer suburb Dodges Ferry saw double-digit growth after GFC

Outer suburb Dodges Ferry saw double-digit growth after GFC

NEW research has revealed the Hobart suburbs that fared best following a major market downturn — and it might not be the areas people immediately think of.

In the face of economic turmoil — the global financial crisis — joint research by PIPA and CoreLogic found it was not Hobart’s blue ribbon suburbs like Battery Point, Sandy Bay or Bellerive that best shrugged off the GFC.

Instead, the data’s top five was headlined by Dodges Ferry with almost 15 per cent growth between December 2008 and 2011.

Tassie’s capital city top five and the regional top five suburbs all posted double-digit growth in the three-year period.

In Greater Hobart, it was Rokeby, North Hobart, Oakdowns and Mount Stuart that grew by between 11.2 per cent and 14.2 per cent.

Northern Tassie suburb Grindelwald posted a median price change of 27.5 per cent with Waverley, Deloraine, Launceston and East Launceston recording growth of 13.4 per cent up to 16.1 per cent.

Property Investment Professionals of Australia chairman Peter Koulizos says the research highlights the resilience of property prices during turbulent times.

However, he says the best-performing locations may be very different post-COVID compared to post-GFC.

“The way people work will likely change significantly post-pandemic and this will have an impact on less traditional property investment locations,” he said.

“Lifestyles will undoubtedly change, which will make living outside the inner-city more appealing

“If you don’t have to go to the CBD for work because you can work from home, then you don’t have to live near it.”

PRD Hobart director Tony Collidge said the affordability of real estate in Tasmania at this time made it attractive to locals and interstate buyers looking for a change.

“History suggests prices in a slowing or falling market decrease in larger proportions as you move further from the central hubs,” he said.

“In 2012-14 prices in inner Hobart fell by 10-15 per cent, Glenorchy up to 20-25 per cent and in New Norfolk and Brighton by 25-30 per cent.

“In those times, finding a purchaser was like finding a Tassie tiger — few and far between.”

Tony said the Tasmanian real estate market wasn’t as significantly impacted by the GFC as the larger capitals.

“At that time Dodges Ferry and Rokeby were very affordable areas, Oakdowns was a new suburb that was just starting to become popular and North Hobart and Mount Stuart were growing in popularity.

“They were possibly the two cheapest inner-city suburbs at that time,” he said.

All the regional areas highlighted in the data are located in the north of the state, within commuter distance of Launceston.

Tony said post-GFC, the economic outlook for the north was positive and an upswing brought greater confidence and prospects to the region.

He said at present the Tasmanian market was robust and he remained confident new areas would come to the fore as we emerged from the pandemic.

Tony said he could see many areas “taking off” including Mornington, Warrane, Cambridge, Lauderdale, Sorell, Lutana, Derwent Park, Granton, New Norfolk, Brighton, inner Hobart and Snug.

Jarrad Bevan, realestate.com.au, 25 September 2020
https://www.realestate.com.au/news/outer-suburb-dodges-ferry-saw-doubledigit-growth-after-gfc/

Property investors remain upbeat but looking at different locations to buy – and to live

Property investors remain upbeat but looking at different locations to buy – and to live

The majority of property investors have remained upbeat during COVID-19, however the pandemic has made them reconsider not only where they buy, but also where they live, the 2020 PIPA Annual Investor Sentiment Survey has found.

The national annual survey, which gathered insights online from nearly 1,100 property investors during August, found that investors remained optimistic about the months ahead.

“While there is no doubt that 2020 has been one of the toughest in living memory for everyone around the globe, property investors have remained resilient in the face of the unprecedented uncertainty that we are all experiencing,” PIPA Chairman Peter
Koulizos said.

“Indeed, about 67 per cent of investors believe that now is a good time to invest in residential property, according to the survey, which is down from 82 per cent in 2019 and no doubt a direct impact of the pandemic.

“However, at the current time, the property market has continued to show its resilience with prices materially stable in most parts of the nation.”
Some 77 per cent of investors say any concerns about potential falling house prices won’t cause them to put their investment plans on hold, the survey found.

Mr Koulizos said about 44 per cent of investors are looking to purchase a property in the next six to 12 months.

“Plus, about 71 per cent of investors have indicated that the pandemic has made it less likely they will sell a property over the next year, which is another factor that will help to underpin property prices,” he said.

The survey found that more than 40 per cent of investors intend to buy property in a different State or Territory to the one that they live in.

Mr Koulizos said interstate investing had been growing in popularity over recent years as investors become more educated about the strategy.

“Investors are recognising the value of working with property investment professionals to help them secure the best opportunities across the nation,” he said.

While the majority of investors remain keen to push forward with their investment plans over the next year, this year’s survey also found they are considering buying, as well as living, in different locations.

More than 17 per cent of investors indicated that the pandemic had made them consider moving to another location, with regional areas set to benefit the most, according to the national survey.

“It’s no surprise that COVID19 and made many people reconsider their lifestyles with nearly one fifth of investors indicating they are contemplating a move,” Mr Koulizos said.

“The survey found for those investors considering relocating the main reasons for doing so were improved lifestyle factors (78 per cent), working from home in the future (46 per cent) and housing affordability (40 per cent).”

 

Daniel Short, Surf Coast Times, 24 September 2020
https://timesnewsgroup.com.au/surfcoasttimes/news/property-investors-remain-upbeat-but-looking-at-different-locations-to-buy-and-to-live/