Will Australia Property Market Collapse this Time?
>> Our simple answer is ‘NO’, for reasons as following
– Prime Minister Scott Morrison issued an Auction and Open House Inspection Ban on Tuesday evening, coming into effect from midnight Wednesday 25 March 2020.
– This auction and open for inspection ban put a ‘NO’ sign on more than 2,700 properties in Melbourne for next three weeks which means no public open inspections and onsite auctions. However, private one-on-one inspection is still allowed.
– This weekend was the first round of online auctions. Though some vendors advised their agents to bring auctions forward before the ban came into effect, some pulled properties back given the current COVID-19 uncertainty, some other vendors still need to sell their properties via online auctions thanks to technologies.
– Though some buyers pulled back as well due to the risk of job losses and income shrinks, some other buyers still have strong purchasing demands.
– In following three weeks or perhaps even longer time, market may not experience sharp price downturn. However we will see lower volume and quieter market activity. The price may halt at current or a bit lower level (4% – 8%).
– If COVID-19 not under control in next 1-2 months and unemployment rate soaring, we may see further drop down on market price of 10% – 12%.
– Melbourne’s property market this weekend has slightly higher number of auctions.
– Due to fears and pressures from COVID-19 pandemic, however, this week’s auction clearance dropped from 70% range to 60% mark, 66%, 62%, and 65% from all three sources.
– The COVID-19 pandemic effect had been observed in both Sydney and Melbourne, the two largest property market nationally, and we believe it will continues spreading in next one or two months.
– The winter may not come yet, but the summer time for the property market will likely end sooner than expected this year.
– During RBA’s emergency meeting held on 19 March 2020, decided to apply another interest rate cut of 25 basis to a new record low of 0.25%, providing two interest cuts in less than 3 weeks.
– The lowest Australia Dollar since October 2002 gives positive effect on property market, but given the current situation, very limited. It may help prevent the market fully back into down trend, but has less momentum to push the price up on the other side.
>> With the COVID-19 becoming a global crisis, in both health and financial sectors, most investors will become more conservative on following investing activities.
>> The plunges of global stock markets also put investors with less bullets they can use on property market.
>> Low dollar value will help on education sector, attracting more overseas students who may rent or buy properties. However current travel ban and potential shutdown of schools and colleges will put a break on their property investing plans.
– When COVID-19 crisis is over, hopefully before next Spring:
>> If only minimum increase on unemployment rate which means most people hold their jobs and incomes, the market will come back to the up trend. With government first home buyer stimulus, the market continues with more first home buyers jumping in.
>> If unfortunately significant portion of employees lost their jobs during this time, the low- and medium-range market will experience a hard time at least by the end of next financial year.
>> High end market normally has minimal connection with unemployment rate. However recent catastrophic plunges happened across all major stock markets globally and damage put on global business and tradings, will all affect how much money those high-end property buyers can use in their purchases.
>> High end property market will be on a case-by-case basis. But still the activity level will be no comparison with what it has before COVID-19 burst.
– Melbourne’s property market came back from last week’s long weekend holiday, with around 1,000 properties went under the hammer.
– This week’s auction clearance was a mixed result, 72%, 68%, and 75% from all three sources, indicating the property market started to taking the effect from fears and pressures from COVID-19 national pandemic situation.
– Australian and global stock markets are on fast down tracks. Australian dollar dropped to its lowest in last 11 years. Economy slows down significantly due to the pandemic outbreak.
– The recent uptrend of property market may see a slowing down or even halted in next few weeks. In next 3-6 months, the vendors will gain the similar feelings that they had in 2017-2018.
– However, a quick look at China’s situation, we will believe once COVID-19 is under control, with government further stimulus on economy, it is highly likely to see the property market will start to pickup its pace and back to the uptrend.
– Due to the Labour Day long weekend, the number of auctions dropped significantly in Melbourne with less than 400 properties under the hammer.
– The results for Melbourne were 70%, 69%, and 75% from all three sources. The drop of rates were from long weekend and possible adverse impact from the virus outbreak.
– Sydney’s auction numbers were lower than previous week’s one as well, but still scored a 80% preliminary clearance.
– There is no double that market is in uptrend. However how much the virus outbreak will affect the property market, especially the second hand property auctions, remain unknown.
– If the virus goes beyond the control and become an epidemic issue nationally, the fear of the risk of potential infection may prevent buyers attending open for inspections and auctions, bringing more pressures on second hand properties.
– An epidemic level spread may also stop people from going to works, which also stop buyers to spend their budgets on houses.
– Melbourne’s property market has survived from its second first major auction test in 2020, with around 1,400 properties went under the hammer.
– There was no doubt that this week’s auction clearance was a boom time result, firmly standing above 70%, 79%, 77%, and 81% from all three sources.
– Corona virus outbreak start to impact on building and construction industry, especially in its supply chain. Lack of materials and delay of time will further lead to the increase of property price.
– In the past February, the whole nation experienced a 1.1% surge on house price index. More properties on market now and the demand from buyers are even stronger.
– Media’s expectation of another interest cut from RBA in its tomorrow monthly meeting is high. However we are conservative over this topic, as there is no sign of better economy and the risk of another round of property bubble is on the fringe.
– Number of auctions is decent this week but not yet comparable to previous year’s one
– Auction clearance stands robust above 60% and 70% for the 23th and 14th consecutive weeks respectively, with 77%, 72%, and 78% from all three sources
– Melbourne property values has recorded a 1.7% increase in September, the largest monthly increase since 2015
– Recession in on the top of topic lists in the media, but will it happen? The simple answer is No
– Properties with 700,000 – 900,000 will be the key range for inner- and middle-ring suburb purchases in next 2-3 years
– 400-500K may be the hot range for outer-ring home buyers
– High-end market leads this round rebound
– RBA Keeps Interest Rate on Hold at 1 Percent
– A downturn in building construction industry in happening
– Sydney and Melbourne house markets rebounding but faster than RBA’s expectation
– Number of auctions increased as spring is coming, but still lower than the same time last year
– Auction clearance stands robust above 60% for the 14th consecutive weeks, with 79%, 73%, and 80% from all three sources, two of which shows 20% higher than the same time last year
– Westpac gained a landmark win against ASIC on responsible home lending case in the Federal Court
– The judgement effectively endorsed the legitimacy of the use of the Household Expenditure Measure (HEM) as a minimum living expenses benchmark in loan assessment
– On today’s monthly meeting, RBA decided to put the interest rate on hold, remaining at 1%
– But expects another cut later this year, to increase inflation, lower unemployment rate and boost economic growth
– Consumer Price Inflation (CPI) data for Q2 2019 shows an improving annual growth in underlying inflation of 1.4%, headline inflation increased by 1.6%,but still well below RBA’s 2-3% Target
– The escalating US-China trade war also poses a risk to Australian economy
– Regarding the current property price downturn, in RBA’s statement, comments as there are ‘some signs of a turnaround, especially in Sydney and Melbourne
– Number of auctions continues being at low levels
– Auction clearance stands robust above 60% for the 12th consecutive weeks and now firmly above 70% mark, with 76%, 75%, and 74% from all three sources
– Compare to the same time last year, auction clearance rates are now 10% or more above
– Construction approvals for multi-dwellings are still at low level
– Following Steller Group, one of the largest local developers in Melbourne who decided to sell off its pipeline of projects in May and went to administration, Ralan Group, the largest private developer in Australia, collapsed with owing $500 million and called in administrators this week
– Domain’s Q2 2019 House Price Report suggests that the market in Melbourne appears to have bottomed out, which matches and is now following the trend line 2 in our prediction made in April 2019
– Market Current Conditions:
— More buyers attending open for inspections;
— Auction clearance at highest rates since November 2017;
— Interest rates at historic low;
— APRA removing rate buffer criteria on mortgage lending;
— Negative gearing policy untouched.
– Number of auctions continues to be at low level
– Auction clearance stands robust above 60% for the 10th consecutive weeks and now firmly above 70% mark, with 71%, 74%, and 78% from all three sources
– NAB’s Q2 2019 research on residential properties shows that NAB residential property index increases by 7%, reaching the highest in last 12 months, though the value is -8
– Following ANZ, Westpac reduced its serviceability assessment criteria from 7.25% to 5.75%
– Victoria state treasurer Tim Pallas published data in last two years, showing with state government’s first home buyer grant + stamp duty concession, more than 62000 Victorian first home buyers benefited from the policy, saving $1.3 billion
– Number of auctions continues to be at low level
– Auction clearance stands robust above 60% for the 9th consecutive weeks and now tightly around 70% mark, with 76%, 69%, and 75% from all three sources
– APRA’s recent move of relaxing serviceability assessment to new home loan application, together with this month RBA rate cuts, will leads to a double-digit boost of the borrowing capacity of new home loan applicants
– Fund $500 million into the National Housing Finance and Investment Corporation (NHFIC)
– Partner with small and private lenders to boost competition
– Available to First Home Buyers with an income up to $125,000 or a couple with $200,000 where both must be First Home Buyers
– Provide guarantees to approved First Home Buyers for additional 15% of purchase price to meet 20% deposit requirement
– The guarantee will run for the lifetime of the loan or until refinanced
The market continues falling but rate was slowing down. Our IL Visual Pi-HUB’s a quick outlook shows three possibilities of rebound.
A report was published by SQM on 21 March 2019, suggesting further fall on house prices under Labor’s negative gearing policy…