Property buyer demand has reached record high levels

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Property buyer demand has reached record high levels through extended Covid-19 lockdowns in Australia’s biggest property markets with purchasers having limited choice as prices continue to rise.

The latest REA insights Housing Market Indicators Report showed demand, based on the number of views per listing of properties for sale on realestate.com.au, hit an all-time high in August, ahead of a delayed spring selling season in locked-down markets.

The limited housing stock available for sale and prolonged COVID lockdowns in a number of states and territories have created difficult conditions for buyers, realestate.com.au director of economic research Cameron Kusher said.

“With lockdowns expected to continue in the ACT, NSW and Victoria, we may not see this demand pressure alleviated until seller confidence returns and the volume of new supply increases once lockdowns end,” Mr Kusher said.

“This disconnect between the supply of stock for sale and buyer demand is likely to create upwards price pressures.”

Prices have increased rapidly during the pandemic with realestate.com.au data showing a 20.8% increase in national property prices over the 12 months to August.

New property listings have fallen nationally as the latest COVID outbreaks and lockdowns hit vendor confidence, with buyers scrambling to buy whatever they can as prices jump.

Mr Kusher said the ongoing reduction in the volume of stock available for sale coupled with elevated search volumes resulted in record high interest from buyers in August.

“It is likely pent-up supply and demand will be released once lockdowns ease and the typical increase in new listings that comes with spring could help provide buyers with more choice and reduce some of the competition for individual properties,” he said.

The surge in prices, the lack of stock for sale and latest lockdowns have not dampened buyer interest.

Wednesday’s report showed views per listing reached a new high after a 1.2% rise in August, to be 46.7% higher than the same time last year.

Mr Kusher said demand based on views per listing increased during August everywhere except Victoria and the ACT, which recorded falls of 6.7% and 3.7%, respectively. South Australia (up 11.2%) and the Northern Territory (up 8.3%) experienced particularly large monthly increases.

The volume of email enquiries to real estate agents on realestate.com.au also reached a new high in August after a 12.2% monthly increase.

“With people in a number of states unable to attend open homes, it’s unsurprising to see a jump in email enquiries,” Mr Kusher said.

Search volumes on realestate.com.au rose last week across all states and territories, despite the continuing lockdowns in NSW, Victoria and the ACT.

Weekly search volumes for properties for sale rose by 1.8% nationally last week to be 17.6% higher year-on-year.

Search volumes reached record highs in Queensland, South Australia and the NT, while locked-down NSW had the strongest rise in buyer searches with a 5.2% rise.

“While lockdowns remain in key states, we would expect a heightened volume of search over the coming month, particularly if we see a rise in new listings,” Mr Kusher said.

The lockdowns in Australia’s biggest markets will delay the typical uplift in activity during the spring selling season, realestate.com.au economist Paul Ryan said, although states free of restrictions face a more normal spring period.

“While COVID-19 restrictions remain in place, housing market activity will continue to be subdued, but I see this as only a delay. So it’s a pause rather than a hibernation,” Mr Ryan said.

“Once restrictions ease and sellers can confidently list, we expect activity to rebound towards the end of 2021 with momentum continuing in 2022.”

Mr Ryan said while buyer demand remained strong with enquiry on realestate.com.au at historically high levels, the lockdowns were impacting vendor activity.

“There are a lot of people on realestate.com.au who are in the serious stages of buying and that hasn’t really abated in these lockdowns, but what we have seen is seller activity has diminished,” he said.

“A lot of sellers are reluctant to list their homes when they can’t have a proper selling campaign and viewing inspections. That’s primarily affecting Sydney and Melbourne at the moment, but there is also some residual uncertainty in other parts of the country.”

While the report showed preliminary weekly sales volumes so far this year were 50.7% higher than the same period in 2020, sales were still well below their peak in April 2021.

Mr Kusher said sales volumes last week were 18.2% higher than the same week last year, despite more states being in lockdown

While sales volumes had lifted in some states and territories, Mr Kusher said they were trending lower in areas subject to lockdowns and restrictions, and that trend was expected to continue.

“Victoria is likely to see a steeper fall in sales given that one-on-one inspections are currently banned in the state,” Mr Kusher said.

“If new listings continue to rise elsewhere, and those states and territories remain out of lockdown, it’s reasonable to expect a lift in sales in those areas over the coming weeks.”

The Victorian government on Wednesday said the lockdown will be lifted in most of regional Victoria from Friday, when private inspections can be conducted with a maximum of 10 people. It plans to allow private inspections of unoccupied premises for a new purchase in Melbourne later in September.

The median number of days a property was listed for sale on realestate.com.au rose for the third consecutive month in August, to 41 days.

“The lack of new stock coming to market could be encouraging buyers to purchase older stock, which may be contributing to the rise in days on site,” Mr Kusher said.

“If lockdowns result in new listing volumes remaining low in September, we’d expect that there might be a further increase in days on site.”

The realestate.com.au data showed combined capital city prices rose 19.3% and combined regional area prices increased 25.1% over the past 12 months.

“The strongest capital city markets for price growth have actually been the smaller capital cities, Hobart, Darwin and Canberra, while Melbourne has been the laggard for growth due to its extended lockdowns,” Mr Kusher said.

“Interestingly, NT is the only state or territory in which price growth in the non-capital city market is weaker than growth within the capital city.”

Mr Kusher said property price growth is still accelerating on an annual basis, but monthly rates of growth have slowed from their peak.

“While growth has been rapid, there has been a noticeable slowing of the growth over recent months,” he said.

Mr Kusher said there was some evidence that the latest lockdowns have slowed price growth in affected markets, but it was too early to see the full impact.

“Price growth will likely slow in NSW and Victoria as lockdowns slow market activity but there are good reasons to expect that price rises will return once lockdowns end,” he said.

“As we shift into 2022 it is likely that, assuming everything goes right, people will have other options with regard to spending, such as more travel, and many people who were going to buy have done so and it should lead to slowing price growth.”

“The anchoring of low interest rates is a big driver of price growth but there are other factors such as an ongoing significant disconnect between demand for properties and the supply of properties for sale, ongoing restrictions on how people can spend their money and the fact that people are looking to upgrade their homes because they spend so much time there,” Mr Kusher said.

Record low interest rates, and the expectation they will stay low for some time, are driving property price growth. Picture: realestate.com.au/buy

The Reserve Bank of Australia board held official interest rates at a record low of 0.1% at its monthly meeting on Tuesday. RBA governor Philip Lowe said the Delta outbreak was expected to delay but not derail the recovery in the Australian economy, maintaining the cash rate will not rise before 2024.

Economists at the four major banks recently upgraded their national dwelling price forecasts for 2021 after a stronger-than-expected surge in the first half of the year, with price growth expected to slow down in 2022.

ANZ and Commonwealth Bank of Australia economists now expect national dwelling prices, on an average capital city basis, will rise 20% in 2021 and 7% next year. Westpac economists forecast an 18% increase in 2021 and 5% rise in 2022, while National Australia Bank economists expect an 18.5% gain this year and 3.6% next year.

Source: REA