Market update: Hot Property – median home values, largest property rise since 1988, stock on the market, capitals vs regionals and more! (Ep.96)

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In this week’s episode, Dave, Cate and Pete take you through:

  1. Hobart median dwelling values. Despite being the capital city with the smallest population, median home values in Hobart are higher than Brisbane, Perth, Adelaide, and Darwin. The trio explore the reasons behind this surprising statistic. But is it sustainable? The Property Buyer thinks yes!
  2. Melbourne growing at 1% a fortnight. At last,the data is catching up with what we’ve been seeing since the inflection point in the final quarter of 2020. The median price for homes sold at auction has soared 18% since March last year.
  3. Why stock on the market is still so low. In economics 101 we learn that price is a function of supply and demand. With supply still so low, it’s no wonder that we’re seeing the highest monthly rises in value since 1988. The trio discuss why new listing figures have returned to normal levels, but total stock on the market remains at half the usual level.
  4. Escape to the regions. For the first time since covid lockdown, monthly data shows that combined capital cities have come ahead of regions in monthly growth statistics this month. This reflects what we’ve seen anecdotally, with the number of enquiries of people looking to sell up their city homes and move to regional areas decreasing as life returns to ‘normal’.
  5. How long will the frenzy last?The trio make their predictions for the property market in 2021. The consensus is that there is still a lot of steam and heat to go. Until we see some lending or macro prudential changes, we don’t expect to see the buying conditions easing for some time.
  6. Relaxation of responsible lending guidelines. The Property Planner explains the expected impact to the property market if responsible lending laws are amended as planned by the Morrison Government.
  7. Australia the ultimate destination nation. Although it may not happen this year, when boarders open up again allowing for immigration, we expect this will add more entrants into the property market, further fuelling the fire into 2022.
  8. Many purchasers are dropping out for fear of overpaying. Although no one wants to buy at the peak of the market, the risk you take by holding out is that you’re priced out of a market that you could have bought into. Provided that you plan for holding the property for the long-term and it fits within your overall property plans, now is the best time to buy.
  9. Top tip – don’t bypass the properties that have been on the market for longer


Show notes:

  • Hobart median home values 
  • Median value for dwellings in Hobart is higher than it is in Brisbane, Perth, Adelaide and Darwin. Why is that? 
  • There are more houses as a percentage of total dwellings in Hobart – no towering high rises. It’s been a favourite destination now that we’re bound to domestic travel – particularly for people who had hefty holiday budgets.  
  • Always question the data, there can be anomalies or it may not be sustained. 
  • Hobart population is smaller, therefore it’s more open to having data skewed.  
  • People with money drive the property market, but they don’t necessarily have to live there. We suspect that there are people in mainland Australia who have decided to buy in Hobart – investment or holiday home.  
  • Level of overseas investment which is disproportionate to the size of Hobart.  
  • Is it sustainable, the property buyer thinks yes! 
  • Melbourne feels like we’re doing 1% a fortnight 
  • The properties that go to auction are the most sought-after ones. We feel that they will do best because it brings out the animal spirits to drive up prices. 
  • The median price for homes sold at auction in Melbourne soared to a record $1.15 million in March – growing 18% since last March. 
  • The eye-watering result smashed the previous price record set just a month before by $35,000, Domain figures show. 
  • Unit prices also jumped to record levels of $724,000 in March – adding $24,000 to the auction median in one month, and 9% growth since last March. 
  • The median auction price for Sydney for houses jumped 17 per cent over the year to $1.755 million. 
  • While the median auction price for units rose 9 per cent to $1.03 million 
  • In Sydney, 37 per cent of vendors are selling before auction, the highest level on record. 
  • The number of people fighting aggressively have increased past the point of analysis of where market value is. 
  • There is nowhere near as many properties for sale than previous years 
  • Price is a function of demand and supply. 
  • Some owners are too scared to sell because they don’t know if they’ll qualify for finance for the next one. 
  • With market going up so rapidly, if you sold today and waited to settle before you buy, the market has gone up after then. 
  • More people doing renovations and extensions at home – they want to make their home more liveable. 
  • More people will be spending more time at home, than they ever have. 
  • This will have a flow on effect – less workers in the CBD, means we need less cafes, less businesses that are servicing them.  
  • Negatively impact commercial property and also residential property, as we want our homes that we work in, more pleasant to be in.  
  • Satellite offices so people don’t have to travel to the city 
  • Escape to the regions 
  • There were a lot of Melbournians escaping to the regions 60% of the Property Buyer’s enquiries were related to escaping to the regions. 
  • This enquiry has slowed down to about 5%. 
  • People who had engaged to do the move, have come off that idea. 
  • For the first time since the pandemic began, the combined capital cities have outperformed regionals. 
  • Backing Melbourne and Sydney in the long-run – as things get back to normal. They will continue to have the outperforming companies, incomes and that will be a movement that’s been occurring globally. Superstar cities get a disproportionate level of investment.  
  • How long will the frenzy last? 
  • Property professor – the frenzy won’t last forever, that heat won’t be there by the end of this year. It will naturally blow itself out. However, whilst interest rates and supply of property is low, property prices will continue to go up.  
  • Other than Sydney and Melbourne that have had a great decade, the other capital cities are playing catch up.  
  • Unless we have lending or macro prudential changes, we won’t see it dissipating for a while.  
  • Once people stretch up their spending power to the limit of borrowing capacity, then clearly we can’t get any higher.  
  • The contingent that are dominating the market are the owner occupiers.  
  • There is still a lot of steam and a lot of heat to go.  
  • Winters in capital cities are slower for listings.  
  • Spring may give buyers a softer opportunity to get in.  
  • Relaxation of mortgage lending guidelines 
  • If they are relaxed further as they proposed to do, I think it will be negligible to be honest.  
  • Loans will get approved faster, so that could have an impact. But it won’t necessarily change the loan size and borrowing capacity.  
  • It’s the paperwork that’s slowing the banks down, hundreds of pages of hard to interpret regulation that the banks are trying to follow.  
  • It could increase volume, which can push up property prices to some degree.  
  • When boarders open up again to immigration 
  • That will be interesting to see.  
  • That could keep it going beyond macro-prudential regulation. 
  • Also these changes don’t happen overnight.  
  • The market will keep running into 2022.  
  • Australia was already a destination nation and even more so with our handling of covid 
  • Don’t want to spend 10% more? 
  • People are saying they don’t want to pay 10% 
  • What’s the worst that can happen if you’ve got job security and it’s within grasp.  
  • No one wants to buy at the peak of the market.  
  • There are no warranties – you need to look at it objectively.  
  • The risk you take by holding out is that your priced out of a market that you could have bought into.  
  • If you’re buying and holding for the long term, then if you pay a bit extra, it doesn’t matter. Your stage of life can have an impact on your plans though.  
  • Top tip 
  • Look at the properties that have been there for a long time, not just the new listings.  
  • They won’t be getting as much traffic, if they’re further down the list.  
  • It could be that they were over-priced to begin with but now the market’s caught up.  
  • Annual change in rents 
  • Looking at all dwellings and some of our cities are surprising like Darwin – the jobs are bountiful and people are jumping on the  
  • Total listings – new listings is back up to normal levels, but total levels are still at half. The take up of new listings and buyers jumping on to them, is going through the roof.  

David Johnston- The Property Planner’s Golden nugget: Reserve Bank met yesterday and confirmed the 0.1% cash rate, will remain low until 2024. That means that interest rates are likely to be very low for a long time. This is one of the main reasons property prices are going up and they will keep going up for some time, subject to macro prudential regulation. Then again, there’s no guarantee that it will slow it down. Rates will remain low until target inflation to 2-3% band, to bring down unemployment. That’s come down to 5.8%. Job ads are at 23% more than 12 months ago and highest level since 2008.

Cate Bakos – The Property Buyer’s Golden nugget: if you’re keen to get some insights on information that breaks quickly, go to CoreLogic and register yourself for a number of free reports that can land in your inbox.

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