June Market Wrap - What’s Happening in SE QLD?

Overall, the broad theme through the month of June was a mixture of resilience and recovery.

Buying and selling activity was heavily impacted in April, but the month of May saw this trend reverse in line with a flattening of the virus curve, easing social distancing measures and improving consumer sentiment. As more vendors have tested the market, listing figures suggest more buyers are also coming to the market, indicated by the strong absorption of new stock.

The trajectory of the housing market is looking more positive than what we were expecting a bit over a month ago.

PROPERTY MARKET - VALUES SHOWING RESILIENCE

With restrictive policies being progressively lifted or relaxed, and economic conditions showing some early signs of improving, the downwards trajectory of housing values could be milder than we first expected.

The national home value index was down by 0.4% over May, with 5 out of the 8 capital city regions recording a fall in values. Respectively 3 capital city regions recorded growth.

Considering the weak economic conditions associated with the pandemic, a fall of less than half a percent in housing values over the month, shows the market has remained resilient to a material correction.

Across the state capitals, Melbourne’s housing market has posted the largest falls over the month., down by 0.9% in May, following a 0.3% reduction in April. Values were also down over the month in Perth, in Sydney, Brisbane and Darwin, but they rose in Adelaide, Hobart and Canberra. Regional markets have been more resilient to value falls, with combined regionals index holding firm through May.

Figure 1: Annual Change in Dwelling Values (Core Logic, June 2020)

BRISBANE - LOCAL DATA

As expected, due to COVID-19, Brisbane home values lost their upwards momentum through 2020, but they have held reasonably firm through the past few months. Whilst the monthly pace of growth has faded from a recent high of 0.8%, late last year, down to negative growth in May of 0.1%, Brisbane has performed well by comparison to other State capitals. House values have remained stable throughout Brisbane, whilst the apartment market recorded a drop of 0.6% in value last month.

Figure 2: Month-on-Month Change in Dwelling Values (Core Logic, June 2020)

BUYER ACTIVITY - GROWING NUMBERS

Despite the loss of momentum of housing value growth, buyer numbers have shown a solid rise in May. After housing market activity fell by around one third in April relative to March, sales activity bounced back by an estimated 18.5% in May.

Auction market indicators reaffirm improving conditions with a combined capital city clearance rate of nearly 63% the week ending 24 May, compared to a clearance low of 30% in April.

While market activity remains well below average, the rise in sales through May coincides with a consistent rise in consumer sentiment and easing of social distancing policies through the month.

HOMEBUILDER BOOST - DOING ITS JOB

The housing industry got a much-needed boost when the Federal Government announced the $688 million HomeBuilder program earlier this month – and new home sales have already skyrocketed, particularly in regional areas that receive the additional new $5,000 regional grant. 

The scheme, announced June 4, gives eligible owner occupiers grants of $25,000 to build new homes up to the value of $750,000 or to assist with renovations of between $150,000 and $750,000, and will apply to contracts entered between 4 June 4 and 31 December this year.

The grant is aimed at supporting 140,000 direct jobs and another one million related jobs in the residential construction sector in the wake of the coronavirus crisis. Some states have launched additional construction stimulus.

EMPLOYMENT _ THE REAL THING TO WATCH

Despite the recent recovery in certain economic indicators from low levels, it’s hard to ignore job losses of almost 600,000 across the economy in April. With the cash rate at its lowest rate ever, improved employment conditions will be a factor in steadying purchasing capacity for housing, and the servicing of mortgage debt.

Figure 3 : Monthly change in Number of Jobs (National) and Unemployment Rate