- Consumer confidence usually correlated with home sales
- While sentiment declines during the beginning of a lockdown, it does recover quickly
- Auctions cleared in Melbourne is less proportionately compared to Sydney
It is not a surprise to say the past 16 months have been remarkable in the housing market.
Initially, house prices were expected to collapse due to the initial economic shock caused by the pandemic, however, with lifestyle changes, super low interest rates, government stimulus measures and other factors working together, house prices began to soar.
Amid the current raft of lockdowns, indicators suggest that the housing market is more resilient to lockdowns now than it was throughout 2020 – despite some pockets of the housing market not performing as well.
CoreLogic has noted that consumer sentiment is an indicator generally associated positively with home sales.
It makes sense; if consumers are more optimistic about their own personal financial decision, they are much more likely to take on a significant financial purchase, such as acquiring a home.
ANZ-Roy Morgan’s weekly consumer sentiment index shows while sentiment did decline initially during lockdowns, it quickly recovered, even during the lockdown itself. We are getting used to dealing with lockdowns.
This year, the index has remained well above 100, only dipping below 100 very briefly during the current lockdown.
ANZ – Roy Morgan Australian consumer confidence index
While the initial stage two restrictions in 2020 saw a 33.9% decline in sales volumes through April, transactions during the current Sydney-Melbourne lockdown have declined nowhere near this level.
For July, CoreLogic has estimated that sales volumes fell by 3.7%, although this may worsen as the lockdown continues.
In Melbourne, which is currently in the middle of its sixth lockdown, has seen its auction clearance rate collapse, although weekly new listings are slightly higher in Melbourne (1,765) compared to Sydney (1,577) and higher than the average weekly listings Melbourne saw throughout the whole of 2020 (1,345).
Overall, the volume of properties sold at auction has been higher in Melbourne than Sydney for eight of the past weeks.
CoreLogic estimates about a third of properties scheduled to go to auction in August were withdrawn.
SQM Research shows the stark difference between auctions cleared in the two largest cities.
Auction Clearance Rate – Melbourne
Auction Clearance Rate – Sydney
“The property may be listed instead by private treaty, or not be sold. Withdrawn properties are counted as a non-sale, and as such weigh down the clearance rate,” explained CoreLogic’s Eliza Owen.
“It is important not to dismiss the portion of auctions withdrawn as merely ‘distorting’ the clearance rate, because it does reflect a loss in demand and vendor confidence.
“Part of the reason rates of withdrawn auctions may be higher across Melbourne is because private physical property inspections had been prohibited, which was not the case across Sydney.”
Unsurprisingly, calls have been made to allow for private one-on-one inspections in Melbourne by the property sector, citing many covid protocols that could be used.
With the lockdowns likely to continue until vaccination rates reach the 70-80% mark, time will tell whether the extension of restrictions will dampen the housing market over the next few months.
