Housing outlook: June 2021

The housing market continues to run hot as strong buyer demand and quick sales support prices. However, there are signs some of the heat has come out of the market. 

While stronger than this time a year ago – at the height of the economic uncertainty – the property market is not as strong as it was before Easter 2021. This may be partially seasonal, however there are quite likely other factors at play too.

Winter is typically a quieter period for property, so spring will be a litmus test for the market, and I expect it will be a little quieter than what we have seen throughout autumn.

Below I analyse the the key forces that will impact the trajectory of the market and provide a breakdown of the current performance of each state and territory. 

• Market Overview
• State by state performance

Longer-term fixed rate mortgages starting to rise

While the Reserve Bank of Australia has repeatedly stated official interest rates will remain on hold until “2024 at the earliest,” we’ve already seen some lenders start to increase their longer-term fixed mortgage rates.

What this means is that people rolling off fixed rate mortgages will likely revert to a higher variable rate mortgage, pay a premium to fix again for longer periods, or take a discount for a shorter fixed period, but run the risk of higher rates when they expire.

The impact of slightly higher mortgage rates should not be underestimated as it can make borrowers consider the prospect of larger increases to rates in the future.

Another factor that could have an impact on mortgage borrowing costs is the RBA’s Term Funding Facility (TTF), which expires at the end of June. The TTF was set up during the COVID-19 downturn to provide banks with a source of low-cost funding, in order to encourage lending.

Stimulus wound back

The end of the government’s HomeBuilder grant in mid-April has removed another source of demand from the market, and there are already material signs of a pullback.

The latest lending data from the Australian Bureau of Statistics showed the number of loans for the construction of new homes fell in April across all states and territories.

Notwithstanding state governments still offering stimulus for first home buyers and the federal government announcing some additional stimulus measures in the Federal Budget however, none of these measures are likely to be as stimulatory as HomeBuilder was. 

Affordability concerns starting to bite

The fact that prices have been rising rapidly is another consideration for potential buyers and is also likely to be contributing to the slight weakening of demand recently experienced.

While the low borrowing costs remain stimulatory for the market, as prices rise it makes it more difficult for purchasers with affordability deteriorating. 

More stock coming onto the market

Finally, the supply of new stock coming to the market for sale has been ramping-up, so buyers have more properties to choose from.

While new listing volumes fell slightly in April compared to March, they were still higher than they’ve been any other month since October 2019. 

What it means for the months ahead

The economic recovery continues to be stronger than anyone expected, however, we are already seeing some moves to mortgage rates by lenders, and I’d expect we will see more of this over the coming months, especially as the Term Funding Facility expires.

While the moves aren’t likely to be substantial, they could impact on people’s ability to borrow and the amount they can borrow. 

More stock is also hitting the market. Demand continues to outstrip supply but not as substantially as it has in the past. As this trend continues, I believe prices will continue to rise, however the rate of growth will cool. 

We should expect a seasonal slowing of sales over the coming months, so the spring selling season will be the next important indicator of the state of the market.

Over recent weeks we have seen some moderation of clearance rates while volumes remain very high for this time of year.

Overall, it does appear that peak price growth conditions have passed. Prices will still continue to rise for some time yet, just not at the same pace as they have been. 

How property is faring around the country

As we enter the typically quieter winter season, how does the data look around the country? 

• New South Wales
• Victoria
• Queensland
• South Australia
• Western Australia
• Tasmania
• Northern Territory
• Australian Capital Territory

New South Wales 

Property prices in Sydney and Regional NSW have continued to climb over the past month.

Days on site

The median number of days on site for a NSW listing, as recorded by realestate.com.au, is now equal to its historic low of 27 days.

Sydney listings are taking around 25 days to sell compared to 47 days a year ago, while days on site in regional NSW fell to a record low of 34 days in May 2021, compared to 70 days a year ago.

Sales volumes

Sales volumes across the state remains elevated but have eased back from pre-Easter levels.

Throughout NSW there have been 66% more preliminary sales so far this year than the same period in 2020. 

Views per listing

Views per listing for properties for sale in NSW was 62.7% higher year-on-year in May 2021. 

In Sydney, properties in the Northern Beaches and Sutherland are getting the most views while Central Coast and Outer South West have recorded the largest year-on-year increases in views per listing.

In regional NSW, Illawarra, and Newcastle and Lake Macquarie have the highest views per listing, while views per listing have more than doubled on year in Capital Region, Coffs Harbour-Grafton, Hunter Valley (excl. Newcastle), Mid North Coast and Southern Highlands and Shoalhaven. 

Victoria

Victorian property prices have continued to rise over the past month.

Days on site

The average number of days a Melbourne property was listed on realestate.com.au in May 2021 was 27 days, down from 47 days a year ago.

Regional Victoria has seen a much larger fall in days on site, down from 71 days a year ago to an historic-low of 42 days this year.

Sales volumes

Preliminary weekly sales volumes over the first 23 weeks of this year in Victoria were 85% higher than a year ago, although have pulled back slightly from the pre-Easter highs.

Views per listing

More people are viewing listed properties, with views per listing across Victoria up by almost half (47.6%) during May 2021, compared to the same time last year.

In Greater Melbourne, the Mornington Peninsula and Outer East recorded the highest number of views per listing in May.

In regional Victoria, Geelong and Ballarat had the highest number of views per listing.

Queensland

Property prices across Brisbane and regional QLD have continued to rise over the month of May following continued strong demand.  

Days on site

In Brisbane, properties that sold during May had been listed on realestate.com.au for an average of 48 days, slightly higher than April but less than the 66 days recorded a year ago. Regional listings took less than two months (58 days) to sell, compared to 79 days a year ago. 

Sales volumes

So far this year, preliminary weekly sales are 71% higher than they were a year ago. While weekly sales have eased off their recent highs, they’re at similar volumes to those recorded in spring last year.

Views per listing

Further highlighting strong demand for homes is the number of times a property is being viewed on realestate.com.au.

Across the state, views per listing were almost 60% higher in May 2021 compared to the same month last year.

In Greater Brisbane, Brisbane-South and Brisbane-West recorded the highest number of views per listing, while Ipswich and Brisbane-East saw the largest year-on-year increases.

In the regions, the Sunshine Coast recorded the highest views per listing, followed by the Gold Coast. Wide Bay and the Sunshine Coast experienced the largest year-on-year rises. 

South Australia

Property prices in Adelaide and regional South Australia have risen moderately over the past month.

Days on site

Capital city listings are taking an historically low 30 days to sell, half that of a year ago.

Regional properties are lagging at around 100 days, which is down from 167 days a year ago.

Sales volumes

The number of preliminary sales in SA last week was the highest number of weekly sales since at least the beginning of 2019.

So far this year, sales were 62.3% higher than the same period last year.

Views per listing

The number of views per listing across the state is 50.8% higher than May 2020.

Across Adelaide, South and Central and Hills had the highest number of views per listing, while South and West recorded the largest year-on-year increases.

In the regions, South East and Barossa-York-Mid North had the highest views per listing and also had the highest growth over the past year.

Western Australia

 Prices in Western Australia continued to rise in May however, there has been a slowing of the rate of growth which will be something to monitor over the coming months.

Days on site

Perth homes that sold during May had typically been listed on realestate.com.au for 60 days, compared to 88 days a year ago.

Regional sales were listed for more than three months (94 days) on average, down from 151 days a year ago.

Sales volumes

Sales volumes remains elevated across the state, with preliminary sales in the first 23 weeks of the year up 82%.

Views per listing

In May 2021, average views per listing were almost a third higher than last year.  

Inner and North West Perth recorded the highest views per listing in the capital city, while Outback (North) and Bunbury led the regions.

Tasmania

Both Hobart and Regional Tasmania have recorded strong price growth over the past month.

Days on site

Properties are selling rapidly in the capital city, with sold properties in Hobart spending less than a month (28 days) on average on realestate.com.au, down from 41 days in May last year.

In the regions, properties are listed for around 48 days, an improvement on last year’s 77 days. 

Sales volumes

There has been some softening of preliminary weekly sales across Tasmania in recent weeks, although year-to-date sales remain 43% higher than the same period last year.

Views per listing

Tasmania not only has the highest average number of views per listing of any state in the country, it has also recorded the largest annual growth in views per listing, up 72.4% compared to May 2020.

Views per listing are highest in Hobart, Launceston and North East, while year-on-year growth is strongest in South East, West and North West Tasmania. 

Northern Territory

While Darwin and Regional NT have recorded very strong growth over the past year, the rate of growth has started to slow in recent months.

Days on site

The strong price growth over the past year is reflected in the days on site metric, which shows sold properties in Darwin during May 2021 were typically on site for 58 days, compared to 81 days a year earlier.

In Regional NT, there has been a dramatic reduction in days on site over the past year, from 162 days in May 2020, to 79 days in May 2021. 

Sales volumes

Although weekly preliminary sales volumes have softened over recent weeks, they remain much higher than they were a year ago.

Cumulative sales over the first 23 weeks of the year are 84% higher than the same period a year ago.

Views per listing

Throughout the territory, average views per listing have risen by a third (32.4%) over the past year, with a 47.9% increase in Darwin and a 14.1% increase in Regional NT. 

ACT

Property prices have continued to rise at a fairly rapid pace in the nation’s capital over the past month, as properties are snapped up in record time.

Days on site

Properties sold in May 2021 in the ACT were listed on realestate.com.au for just 24 days – a record low, and half that of May 2020 (48 days).

Sales volumes

Although there has been a moderation of preliminary weekly sales over recent weeks, sales volumes across Canberra over the first 23 weeks of 2021 are 35% higher than over the same period last year. 

Views per listing

There has also been a strong increase in interest in ACT property with views per listing rising by 46.8% year-on-year. 

Originally published as: REA Insights Property Market Outlook – June 2021