- As per the latest report, auction volumes have dropped, and clearance rates have stayed bleak due to rising coronavirus cases, and school holidays that have drawn upon the housing market.
- A preliminary clearance rate of 65.1% was recorded amongst a total of 1,185 homes scheduled for auction this year as compared to a 64% success rate of 953 homes for auction in July 2019.
- 0.7% drop in home values was recorded across Australia, with a 0.8% fall in capital city prices as more sellers put their homes for sale.
- Dwelling approvals fell 16.4% in May, driven by a plunge of 35% in private sector dwellings, and coronavirus pandemic has resulted in further fall in construction activities as immigration has dried up.
Auction clearance rates have improved
More sellers are putting their homes for auction as coronavirus induced drop in Australian housing values accelerated in May 2020.
Auction volumes were feeble throughout amalgamated capital cities when compared, week-on-week basis. As per Property Market giant, CoreLogic latest report, a preliminary clearance rate of 65.1% was recorded across a total of 1,185 houses slated for auction due to reduced activity amid school holidays. A softer preliminary clearance rate of 64.5% was reported across 1,485 auctions last week, which was revised to 60.6% during the time of final collection. About 953 auctions were conducted in the first week of July 2019 with 64% recorded as (clearance) rate.
Auction clearance rates for Sydney and Melbourne improved due to lower activity throughout the two major auction markets of Australia.
Across 439 auctions in the last week period, a final auction clearance rate of 64.3% was recorded in Melbourne, which was higher than the week before. The previous week had a success rate of 62.7% throughout 645 auctions. While 563 homes auctioned in Sydney last week, returned a preliminary clearance rate of 68.1%. The clearance rate in Sydney was higher than that recorded in the previous week when about 66.9% of 644 auctions delivered a successful outcome. Later, the final clearance rate stood at 62.9% for the previous week.
Canberra surpassed on success rate front through the capital city markets with 81.6 percent recorded as an initial (clearance) rate. Though, it decreased on the final clearance rate in the first week of July 2020, recording 84.4 percent of homes successful at auction throughout Canberra.
Market experts suggest that bleak results were expected due to COVID-19 restrictions in state capital cities. Though clearance rates have shown some improvement, they are still soft. Further softness is expected in the auction results, especially in Victoria as lockdown strengthens amid the second wave of COVID-19.
Housing Values declined in June
The monthly home value index reflected a 0.7% drop in values in June nationally led by a 0.8% fall in capital city prices. The highest capital city drops happened in Melbourne and Perth, both recording a 1.1% fall whereas Sydney recording a 0.8% drop in values. Smaller cities like Darwin and Canberra recorded modest gains. Even after values being down in June, assessments of market activity mirrored a further revival from the April low.
The Research Head of Property Market giant stated that price falls were anticipated to persist, with about 10% fall from the peak. Substantially, high unemployment rate and cash rate are unlikely to be lower, showing the importance of the labour market fundamentals in enhancing the purchasing power for housing. There is also an additional risk of withdrawal of the fiscal stimulus and sustenance of easier bank conditions for people to service their mortgages. She asserted the importance of JobKeeper and JobSeeker in preserving the stability of the housing market.
She also added that economic conditions are a bit better than initially forecasted by RBA, and a crash in the property market is not expected.
As per the Property Market Leader’s data, listings have increased by 42% after registering a low point in May, but extra properties available for sale are accruing buyers as home sales were also up by ~30% in June. These figures reflect how the market would perform in the short-term period.
Though the fall in home values has been moderate since April, the longer-term outlook is uncertain and depends on the performance of the economy when fiscal support is withdrawn.
Plunge in home building approvals in May
Coronavirus affected home building for the first time in the approvals process in May. Building approvals from councils fell by a steep 16.4% in May in seasonally adjusted terms, driven by a fall of 35% in unit and attached-dwelling approvals while private sector house approvals dropped 4.4%.
Daniel Rossi, Director of Construction Statistics at ABS, stated that minor effects of COVID-19 were evident in headline Building Approvals results, while a drop in approvals for apartments was anticipated before coronavirus pandemic.
Building Approvals had been delayed due to May’s fall because of sluggish planning and approvals structure in the regional government and piled up applications. The delay now seems to be exhausted, and several new greenlit projects plunged steeply in May.
Experts suggest that a dip in demand for new dwellings is being anticipated with drying up of immigration amid COVID-19 crisis. Due to rising expectations of a fall in net migration in years ahead, demand for new housing is expected to be lower.
Though there has been an improvement in housing turnover and economic activity, downside risks remain. The recent spike in active virus cases in Victoria is a reminder that the risk for second wave remains and restrictive policies might return if the virus curve further steepens.