- Strength of the market due to the broader reaction of Covid, the report says
- Mortgage valuations undertaken have also risen
- Areas such as Alice Springs and Esperance are only just beginning to see their property markets recover
Property valuators Herron Todd White has released their latest report highlighting property markets throughout Australia.
CoreLogic recently released data showing that housing prices rose by 22.3% last year – the highest growth levels seen since the late 1980s.
The report argues that the strength of the market is due to the broader reaction to Covid.
This included expansionary monetary and fiscal policies such as the cutting of the cash rate to the record low 0.1%, stimulus initiatives such as the JobKeeper incentive for employers to keep employees on their books, and the HomeBuilder grants.
In addition, lifestyle changes impacted the residential market such as working from home. This has reduced transport costs, as well as entertainment and spending costs, thus increasing the savings of many Australians.
Although residential property prices were strong across Australia in general, regional markets have in particular been performing strongly.
After all, owner-occupiers are seeking larger and flexible living spaces. This is characterised by Bernard Salt’s acronym VESPAs – Virus Escapees Seeking Provincial Australia.
Restrictions have also facilitated the widespread acceptance of virtual property inspection by ‘out of area’ buyers, resulting in increased confidence to buy ‘sight unseen’.
This has resulted in regional areas near major cities such as the Sunshine Coast, Mornington Peninsula and the Illawarra performing well.
The demand for new homes – and the lack of existing homes – has seen record levels of residential construction.
“However, another consequence of COVID has been supply chain disruption. Shortages of skilled labour and materials are causing cost escalation and delays for some builders,” said Kevin Brogan, National Director, Group Risk and Compliance, for Herron Todd White.
Additionally, Herron Todd White said it noticed a rise in mortgage valuations undertaken.
“Owners have not bought or sold property, but are looking to take advantage of the increased equity in their homes.
“High transactional costs mean that many homeowners are also ‘staying put’ and refinancing to renovate.”
Slowdown to continue
Like most commentators, the report confirmed signs – from the final quarter of last year – show there is a range of mitigating factors slowing the housing market.
There has been an increase in residential property listings, lowering the auction clearance rate and challenging the market urgency that was driven by a fear of missing out.
The rapid price increases resulted in declining housing affordability, significantly increasing the amount of time to save for a deposit.
Another major factor expected to facilitate the slowdown is the Australian Prudential Regulatory Authority’s (APRA) serviceability assessment buffer increase to 3% above the mortgage rate. In particular, this will impact first time buyers and households on lower to mid-range incomes.
Herron Todd White’s “property clock” notes Canberra and regional areas such as Launceston, Dubbo and Bathurst have peaked. Geelong, Newcastle and South West WA are among those nearing their respective peaks. Most of Australia remains in the rising market vicinity.
Areas such as Alice Springs, Bundaberg and Esperance are only just beginning to witness the start of their recoveries.
However, the report notes one final trend is the new ‘living with covid’ stage – a new phase of the pandemic whereby interstate and overseas borders will be less restricted.
“These population movements could impact demand in local markets over the coming months driving further price growth,” concluded Mr Brogan.
