The red-hot performance of the property market appears to defy gravity as we continue to battle the virus and formulate policies and strategies to stimulate our post-lockdown economy.
It’s not unreasonable to ask why real estate is so strong when other economic sectors struggle to return to pre-Covid results.
There’s no trick or magic, though; just another example of how supply and demand affect prices of all commodities and products.
More buyers are in the market right now than we have properties available, and that’s true not just of our own state capital but every capital.
This strength is extremely evident in our East Gippsland region, where we are experiencing additional demand from digital workers seizing the opportunity to change their lifestyle and work remotely without losing income.
Let’s look at the numbers to substantiate the supply and demand argument.
Housing stock on the market is 28.5% lower this year than the five-year average, according to the latest data from CoreLogic. Over the same timescale, new listings are down 12.9%.
As a result, vendor discounts – the amount a seller is likely to reduce their price by during negotiation – are almost non-existent. They average just 3% nationally and 2.7% in the state capitals.
Auction clearance rates across the country stand at 78%, a thunderous performance that we last saw in heady days of late 2016 and early 2017. Homes are selling one-week faster on average than they were a year ago when most states were in a boom that was stopped overnight by the coronavirus.
Here’s the thing to remember about the immediate impact of the virus: prices did not crash. Homeowners pulled their properties off the market for fear they’d be caught in an unprecedented slump. But that ensured that supply dried up, and that in itself meant prices remained firm despite what doomsayers such as the Commonwealth Bank had predicted at the time.
Another important factor is the price of money. Interest rates remain at historic lows and there’s little sign of the Reserve Bank reversing this situation.
So what does this mean for you?
Firstly, it’s important to acknowledge that real estate comprises thousands of micro-markets. While national performance has an influence, the buyer and pricing trends in your area are likely to be different.
We’d be happy to provide you with an overview on how things are playing out in our local market.
If you are thinking of buying or moving up the property ladder, then accelerating your strategy is probably a good idea. There are always cycles in real estate but few busts. The current pent-up demand and low interest-rate environment suggests the market won’t run out of steam any time soon.
Sellers are in a more comfortable place, but whether you’re scaling up or looking to downsize, prices for both options are moving quickly. You’re not guaranteed to get what you want, when you want it, at the price you had anticipated.
As experienced local agents, if you’re ready to buy or sell, we should have a conversation about trends and opportunities. Good opportunities can be found if you’re diligent with your research and strategic in your approach to purchasing.