As per the Chief Economist from REA Group over the past two weeks, we have seen a significant change in sentiment on realestate.com.au. Buyers are still curious and the number of searches has increased significantly. Search activity on the ‘Buy’ section of realestate.com.au is now 35 per cent more than this time last year. Although this comparison is between an Easter weekend and a non-Easter weekend, the upwards trend is clear. The high levels of search activity haven’t yet translated into high levels of enquiry, but it does suggest that predictions of Australia-wide house price drops of 20 per cent or more are way off the mark.
Plummeting house prices are off the cards, but here are FOUR other predictions for the real estate industry post COVID-19.
1. House and land to perform better than off-the-plan apartments
Investors and first homebuyers are both active buyers of new homes, whether they are house and land or off-the-plan apartments. Investors, however, dominate apartment purchases (the majority of apartments in Australia are owned by investors) while first homebuyers are particularly active in house and land. Right now, buyer enquiry for both house and land and off-the-plan are down compared to earlier this year. However, first homebuyer enquiry is up compared to last year while investor activity is still down. This is leading to far greater levels of enquiry for house and land compared to off-the-plan apartments.For that reason, house and land will recover more quickly. New apartments are increasingly being purchased by first homebuyers, particularly in Melbourne and Sydney. However, a drop-off in both local and offshore investors will take longer to turn around.
2. Auction activity will eventually return to normal
A ban on open-air auctions has led to a dramatic drop in auctions taking place with 95% of sales now made through other means. While we are currently seeing very few online auctions taking place, once the ban is lifted, it’s likely there will be a return to higher levels of auction activity. Live on-site auctions work very well in some markets, particularly Melbourne, Sydney and Canberra and there is no doubt that a lot of agents are keen to get back to running them.
3. Suburbs with high levels of rental housing will be most impacted
The rental market is slowly improving due to a wide range of federal and state government measures to protect renters and landlords. While the search numbers for rental properties on realestate.com.au fell in the two weeks following the lockdowns, it has now started creeping back up. There are still some areas that are struggling with rising vacancies. The suburbs that are seeing the biggest jumps in rental listings are those that have a lot of very similar apartments. It is likely that there are a number of things driving this trend.
The first is that these areas can often be located close to universities and therefore typically accommodate both local and foreign students. Many local students have returned to their family homes while many foreign students have not returned to Australia. The second is that apartments are more likely to house younger people, who are more exposed to job losses. Finally, the similar nature of each apartment means that there may be a more competitive rental situation; tenants might be prepared to move to an apartment down the corridor or a couple of floors down if a cheaper price was offered.
4. Premium suburbs will better-weather COVID-19
The highest views per listing on realestate.com.au are still dominated by houses in premium suburbs in our capital cities. Topping the list are houses in inner Melbourne while Sydney’s lower and upper north shore is also doing well. While it is still likely we will see some level of price decline in these areas, this imbalance between demand and supply will likely provide a limit to how far they fall. It is likely that part of what is driving this high level of search is people looking for bargains. Premium suburbs are generally perceived to hold value best during downturns.