As another month passes by with coronavirus at the forefront of our minds, new data continues to confirm that the residential real estate market was in hibernation rather than crashing.
Economists, property pundits and journalists have been divided on how coronavirus will impact housing prices since the outbreak began earlier in the year. The notorious delay of reliable housing data made this difficult to track at the beginning, but time has allowed us to look back at how the market responded.
The positive news for property owners is that their asset is likely worth a lot more than it was this time last year according to CoreLogic’s Home Property Value Index for May 2020. Sydney and Melbourne both reported double-digit year-on-year growth, with Darwin and Perth being Australia’s only capitals that declined in median value by that metric. More frequently reported, however, has been the change between median prices in April and May, which saw small drops in Sydney, Melbourne, Perth, Brisbane and Darwin. Nevertheless, these have been negligible so far – particularly since highly motivated sellers should be the only ones listing their properties.
Since the beginning of the year, we have periodically discussed auction data. Originally, this was done so in the context of observing favourable signs of a property recovery in markets such as Sydney and Melbourne. When coronavirus struck, the same data has offered some insight into how the market responded. As you can see in the below graph, the year started strong with a progressive increase in the number of auctions over February while the clearance rate hovered around a very healthy 80 percent. For the sake of comparison, consider that Sydney’s first weekend of 2019 reported an auction clearance rate of just 49 percent. Things were looking very promising! As coronavirus struck, the auction clearance rate plummeted to a trough of 34 percent by mid-April.
Another interesting anecdote from this graph involves the number of auctions conducted in Sydney each weekend. Just as coronavirus claimed its first Australian fatality, the number of auctions dropped by almost a third within a week. By the time the Ruby Princess had controversially disembarked infected passengers, Australia had been swept up by the crisis and a deluge of auctions quickly followed. During the first weekend of April, more than 1,200 auctions took place in Sydney and just 37% of them were successful. By this time, the JobKeeper allowance had been announced which saved countless Australian jobs and stemmed the flow of unemployment claims. The past month saw Sydney act in a way many of us had hoped: the number of transactions dropped and auction clearance rates resultantly returned to a healthier level.
As the cold winds of winter arrive, Australia finds itself in a very different situation to where it was just a few short weeks ago. With luck and a bit of personal responsibility, things might just return to normal sooner than expected. In that case, we should expect the property market and broader economy to continue showing signs of normalcy themselves.