John McGrath – Early bird sellers catch the worm

as published in therealestateconversation.com.au by John McGrath

The early birds will catch the worm this Autumn, with sellers going to auction sooner rather than later benefiting from an ongoing shortage of stock, which might not last much longer, on top of incredibly low interest rates. 

Latest figures from SQM Research show the number of homes for sale increased nationwide in January, which is quite unusual for the holiday month, but they remain well down on 12 months ago. 

The biggest increase was in Sydney where listings for sale rose 5.1% in January compared to December but are still almost -25% down on January 2019. Auction clearance rates in the first couple of weeks of February were in the 70%-range, which is considered strong. 

Listings in Melbourne rose by half as much in January at just 2.7% and are down -12.3% year-on-year (YOY). Early February clearance rates were in the mid-60% to 70% range. 

Brisbane listings increased 3% in January and are down -6% for the year, while Canberra had the smallest increase in homes for sale at 0.6% in January, equating to -12.3% down YOY. 

What’s interesting here is that we usually see a small fall in the number of homes for sale in January but clearly, a bunch of smart sellers have gone to market early to capitalise on the strong demand and rising values of the last two quarters of 2019. 

I do expect to see stock levels increase over coming months, so early Autumn sellers are the best placed for great results. 

Price growth is continuing across Australia with green shoots all over the place. Every capital city bar Darwin experienced price gains over the past three months, according to the latest CoreLogic monthly report. 

This is a telling sign of a continuing national recovery based on national factors that benefit both buyers and sellers in every part of Australia, namely falling interest rates, better access to finance since mid-2019 and ongoing stable employment. 

Darwin was only slightly negative at -1.6% for the quarter, while Sydney and Melbourne were the leaders at 5.6% and 4.9% growth, followed by Hobart at 3.4%. 

Since the federal election in May last year, buyers across the country have enthusiastically returned to property and this revived demand has pushed up prices. 

Data just released by the Australian Bureau of Statistics shows the value of new housing loans has surged by almost 21% since the Morrison Government was returned, with new owner occupier mortgages in NSW and Victoria the drivers. 

Aspiring first home purchasers are also out in force this month, with 5,700 reportedly already signed up for the 10,000 loans available in the First Home Loan Deposit Scheme, which enables people to buy with a 5% deposit and a guarantee on the rest of the 20%.

If you miss out on this first round, don’t worry – another 10,000 loans will be available from July 1.  

Investor activity is also increasing but at a much slower pace. I think this will change as people see prices continue to rise while interest on deposits remains dismally low. 

Many fixed loan rates are now less an average rental yields, so investing will become more compelling as people look for better ways to grow their wealth than money in the bank. There is still plenty of scope for capital gains, even in our most expensive city, Sydney. 

We’ve been told by the RBA that we’ll likely be in a low interest rate environment for an extended period. So, as thousands of existing term deposits mature over time, I think more people will switch from cash to property.