Once again, we find ourselves in the grips of a COVID outbreak, with two major states subsequently under lockdown. But rather than come to a standstill, the property market has instead quickly adapted, with sales continuing on with the help of technology and the market armed with the experience of last year.
For those of us in the property market (active or not), there are many lessons to be gleaned from looking at the historical data from previous lockdowns to inform our expectations as to how the housing market will be affected in the coming weeks.
A recent ‘Housing market through Pandemic Lockdowns’ report released by CoreLogic provides an overview of the housing market performance through lockdowns over the past 15 months, which unlocks some key elements that can provide some insight.
Let’s dive right in!
Auction results have improved with each lockdown
Much of the auction outcomes modelling has been based on the Sydney and Melbourne property markets, as these markets have comprised almost 85% of all capacity city auctions held since the beginning of 2020.
In CoreLogic's latest report, the outcomes for all auctions in Melbourne and Sydney were collected under various social distancing conditions, while the pre-COVID average shows 5 years worth of results before the pandemic.
Longer social distancing periods had far lower average auction volumes
As the result of discussions between vendors and their agents during these lockdown periods, only properties that were confident to go at auction were carried through. This is also reflected in lower rates of properties ‘passing in’, along with large numbers of cancelled or postponed auctions.
Stage 3 and 4 restrictions in Melbourne resulted in tougher selling conditions amid tough rules limited home inspections and auctions. A cloud of uncertainty was also cast upon the state with an economic downturn as a result of the extended lockdown, bringing auction volumes to a record low
Properties withdrawn through lockdowns
Higher proportions of properties were withdrawn from auction altogether in periods of lockdown, transitioning to private treaty listings or pausing campaigns. In Melbourne, the amount of auctions withdrawn became smaller with each lockdown.
Higher portion of properties sold prior and after auction during lockdown
For Sydney, the proportion of properties sold prior to auction increased from 23.1% over the past 5 years, to 28.0% during stage 2 restrictions, and 35.2% for the two weeks ending 4th of July. Across Melbourne, the portion of properties sold prior to auction also increased with each lockdown.
Agents are now adapted to the fast-changing nature of the pandemic, and have been able to pivot fast in getting deals done fast prior to auction at the announcement of restrictions, with the swift recovery of the market in the latter half of 2020 also helping along sales after the auction event (what otherwise would have been passed in sales).
The market this week
Buyers, sellers and agents have all been conditioned to adapt very quickly to transacting real estate in a lockdown. At Upside, our agent workforce have always worked remotely from their own homes in your local area, supported by industry-leading technology and an award-winning support team so they are well experienced with taking things online to help their vendors continue transacting at times of real estate restrictions.
The combined capital city preliminary auction clearance rate last week improved as volumes remained steady week-on-week. There were 2,121 capital city homes taken to auction over the week, returning a preliminary auction clearance rate of 76.4%. This was higher than last week’s preliminary figure of 73.6% across 2,168 auctions, later revising down to 72.1% by final collection on Wednesday.
Sydney In the midst of their lockdown, Sydney saw 661 properties taken to auction, with many auctions rescheduled to a later date. Of the 567 results collected so far, 76.5% reportedly sold and 19% have been withdrawn. Of the 434 sold results, 70.7% sold prior to the scheduled auction date.
Last week, 756 Sydney homes were auctioned with a final clearance rate of 70.5%. Both the withdrawal rate and proportion of auctions ‘sold prior’ were well above average across Sydney as vendors pivot their selling strategies.
Melbourne 1,077 homes were auctioned this week, returning a preliminary auction clearance rate of 75.3%.
Canberra Once again the best performing capital city auction market this week with a preliminary auction clearance rate of 90%.
Brisbane The busiest of the smaller capital cities with 162 auctions held and a preliminary clearance rate of 75.8%.
Property values have remained resilient through lockdown
In the early months of 2020, doom and economic gloom was forecast with the onset of the pandemic, and housing values were predicted by many banks and economists to crash - coinciding with the onset of stage 2 restrictions nationally.
In the face of the overall pessimism and lowered price growth expectations, new advertised supply also fell, declining -44.7% through the month of April 2020.
These subdued levels have continued on even as restrictions have listed and COVID case numbers remained relatively low, and it was not until 2021 that new listings added to the market have trended closer to the 5 year average.
Through 2021, as housing demand surged in recovery from lockdowns, CoreLogic has observed a greater volume of sales than new listings added to the market - resulting in a record low level of total stock available (the total volume of listings across is currently 139,897.
The previous 5 year average level of total stock for this time of year is 201,442).
This supply and demand dynamic will keep property prices propped up for the foreseeable weeks ahead.
Lockdowns followed by ‘catch-up’ dwelling purchases
One of the extraordinary elements of housing market performance in recent months has been strong sales volumes.
According to CoreLogic, there were approximately 582,900 transactions nationally, compared to a decade average annual volume of 455,346. __This is the highest annual sales volume observed since February 2004. __
Record low mortgage rates is also a key factor in spurring pent-up demand from prospective buyers to step in to the market, with another source of demand in the last year stems from sales that were postponed through the first half of 2020 due to COVID restrivtions.
It is reasonable to assume that for a sizeable financial and temporal commitment such as housing, a period of lockdown is unlikely to deter a housing purchase altogether, unless household income is severely affected.
In fact, it was found that Australian households saved 22% of income through the June 2020 quarter (compared to a then decade average of 7%), and with the further boost in government incentives for the purchase and constructions of new homes, this only spurred demand.
Ultimately, the months following lockdowns have not only resulted in a resumption of sales activity, but potentially the additional sales that would have otherwise transacted during lockdown periods.
In the current environment, there is likely to be a jump in sales activity as restrictions ease across Greater Sydney and Melbourne. Housing markets have already proved resilient amid circuit breaker lockdowns.
The key unknown then becomes how long will the current lockdown will actually last.
Worried about selling at this time? Upside is your safest choice. With remote appraisers, virtual open for inspections & meetings, digital contracts and agents that have always worked from home, there is no agency in a better position to look after you when selling in the current climate. Book your free, no obligation (and digital if you'd prefer) appraisal with us today.