- Spring selling season has had a late start due to lockdowns in the major cities
- Longer daylight, foot traffic and good weather can make for a better summer season
- The usual shutdown that typically occurs from Christmas to Mid-January, however, could make an impact
In his first article for The Property Tribune, guest contributor Arjun Paliwal, who is the founder and head of research at data-driven buyers agency InvestorKit, discusses the impact of a late spring selling season.
Just like the wedding industry loves the romance of springtime, real estate is just as smitten with the most optimistic season of all.
Spring generally signals properties flooding the market, vendors taking advantage of warm weather and lush gardens to take buyers through homes, and an uptick in open homes and auctions. However, this year, the spring selling season has had a late start, particularly in the major cities constrained by lockdowns.
CoreLogic statistics reveal Spring listings in the decade prior to the pandemic increased by around 10 to 25 per cent, depending on which Australian city you’re in. But the past 18 months have been exceptional times and everyone has had to adjust.
In some states, the real estate industry was slapped with tight restrictions or bans imposed on in-person inspections and auctions.
During the early part of Spring, with Australia’s biggest cities still in lockdown, clearance rates plummeted as potential purchasers baulked at buying sight-unseen. In spite of this, the unprecedented combination of low interest rates, lifestyle shifts, investment in infrastructure, and dwindling stock levels, has conspired to sustain double-digit price growth in most cities and many regional areas.
Spring hasn’t quite sprung
Sydney and Melbourne have been an exception to the traditional spring selling season, with lockdowns and restrictions affecting the excitement and boom in properties hitting the market.
However, as these cities’ restrictions ease, a stronger sense of confidence will return – albeit, a bit later than in previous years – enough to propel agents and vendors to take advantage of the springtime bonanza.
With almost two years of pent-up demand about to meet a wave of supply in an already buoyant market, are we about to see the best Summer sales season ever?
A lot of the same factors that make Spring the ideal time to list hold true for a Summer selling season – longer daylight hours, a lift in optimism, and plenty of foot traffic. Good weather also eases the difficult relocation process for vendors and purchasers alike.
Data reveals a market hungry to buy
The psychological drivers are there for many buyers, but more than that, the July-ending data for home loans was on fire, and that typically translates to a bump in prices in the six months to follow. Therefore, you can expect a bullish last quarter on the strength of those home loan figures.
It’s worth noting that banks are quicker to pull the trigger on home loan approvals than they were when the refinancing boom was occurring. That has slowed, so approvals are correspondingly speeding up, which is great news for motivated investors or impulse buyers.
However, the chief economist at Ray White Real Estate, Nerida Connisbee, sounds a cautionary note, which I echo.
Many new loans are being taken out by people at six times their income or even more, an indication of some deterioration in approval standards that could be on the watch list for the Australian Prudential Regulation Authority (APRA).
Historically, when APRA intervenes and makes substantial changes to the flow of credit, it reduces prices or slows down markets heavily in our larger more sensitive-to-change markets. That’s what happened in 2017 to 2019 when prices declined by up to 6 per cent, and in some areas of Sydney by up to 15 per cent.
A hot take on the warmer months
One challenge to consider with a Summer selling season could be the month-long shutdown that takes effect just when everything’s starting to hum along – from roughly a week before Christmas to mid-January.
This might take some steam out of a market that traditionally feeds on its own momentum. As things open up to end the year, it’s clear many are thinking about making up for lost times. With travel being top of mind, listings are increasing, and clearance rates in our major cities are declining off the back of this.
Summer sales campaigns can also be at the mercy of unpleasantly warm or muggy conditions on auction day. While that won’t deter investors, it might test the resolve of the impulse buyer.
Yet looking at all the factors, I believe that we can expect to witness a very definite ‘Spring’ in the step of the real estate industry this Summer across most of our cities, however, our two largest cities are expected to see some of the heat cool off based on their listing trends, affordability constraints and as people look forward to catching up on lost times.