Australia is officially in a recession but that hasn’t discouraged buyers on the hunt for a property, as consumer confidence surges.
Treasurer Josh Frydenberg this week confirmed that the Australian economy has contracted by 0.3 per cent in the March quarter due to the double whammy of the bushfires and COVID-19 impacts.
Economic growth also slowed to 1.4 per cent through the year, according to the Australian Bureau of Statistics (ABS).
“This was the slowest through-the-year growth since September 2009 when Australia was in the midst of the Global Financial Crisis and captures just the beginning of the expected economic effects of COVID-19,” ABS chief economist Bruce Hockman said.
Aussie property prices edge lower
To top it off, Australian housing values decreased by 0.4 per cent, falling for the first time since mid-2019, according to new CoreLogic data.
Despite the drop in prices, transaction activity in the market leapt back by nearly 19 per cent in May, after a 33 per cent decline in April.
Total sales volume across the combined capital cities surged by 20.4 per cent in May. It’s worth noting, however, this is coming off a low base in April, when recorded monthly sales volume was at its lowest since 1991, if excluding January results.
Another indication of market activity is the number of new properties listed on the market.
If the total stock of properties on the market reach high levels, it’s a sign that supply is outweighing demand, according to CoreLogic head of research Tim Lawless, who added that “this does not look to be the case”.
Looking at the numbers, new listings surged by about 22 per cent in the 28 days to June, but total listings decreased by 2.9 per cent.
This means new listings have not only risen but have also been absorbed, resulting in an increase in home sales.
Lockdown restrictions ease and consumer confidence lifts
CoreLogic’s Australian head of research Eliza Owen said that “buyer demand is outweighing the volume of new listings”.
She attributes the rising buyer demand to an increase in consumer confidence, thanks to the easing of lockdowns and lower coronavirus case numbers nationally.
“People may be feeling more confident about the future of the Australian economy, their personal finances, and property purchases,” she said.
Mr Lawless agreed that consumer sentiment is “consistently improving” since early April.
“With consumers feeling more confident, households are better equipped to make high commitment decisions such as buying or selling a home,” he said.
“A lift in housing market activity should also support broader economic activity, with housing turnover providing positive flow-on effects to other sectors including retail, construction and banking.”
Another factor behind increasing buyer demand is that the workers that have been hit the hardest by the pandemic are not as likely to have a mortgage, Ms Owen noted. As those bearing the brunt are more likely to be renters rather than owner-occupiers, the housing market is showing less of an impact, for now.
“With stability emerging in the property transaction space, it is evident that additional housing stimulus is less urgent among those that can already afford property, and is another case for addressing housing costs for low income earners,” she said.