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CoreLogic investigates how the housing market reacts to lockdowns

As the Delta variant of COVID-19 spreads in Australia, CoreLogic has released a comprehensive overview of housing market performance through lockdowns.

According to the report, the Sydney housing market has been relatively resilient over the past week-and-a-half of lockdowns.

For the two weeks ending in July 4, Sydney has seen 74.6 per cent of scheduled auctions achieve a successful result.

This was slightly lower than the previous week ending June 20, when 76.8 per cent of auctions saw a successful result. It was also below the previous five-year average, where 77.2 per cent of results have been successful.

Australian housing market values had a peak to trough decline of just 2.1 per cent through 2020, before surging up 12.2 per cent through the first six months of 2021.

Auction outcomes have also gradually become more favourable to Melbourne sellers through lockdown, as well as Sydney.

Source: CoreLogic

CoreLogic Head of Research for Australia, Eliza Owen noted this was due to the unique dynamics of a COVID-19 induced lockdown.

“It is true that demand takes a hit during lockdowns,” Ms Owen said.

“There was a lot of uncertainty amid stage two restrictions nationally last year, and sentiment for housing market outcomes plummeted. But supply also declined, because sellers and agents knew it may not be the best time to market property. That helped to balance out the overall effect on prices.”

As higher portions of properties were withdrawn from auction altogether in periods of lockdown, vendors either transitioned to private treaty listings, or paused the campaign.

Relative to the previous five years, the portion of withdrawn auctions has remained elevated in Melbourne, and were somewhat elevated in stage two restrictions across Sydney.

For Melbourne, the proportion of auctions withdrawn became smaller with each lockdown. Withdrawn properties are counted as an unsuccessful auction result, and as such have weighed on the clearance rate, even as a lower portion of properties had a passed in result.

Source: CoreLogic

CoreLogic found a higher portion of properties sold prior and sold after auction during lockdown.

For Sydney, the proportion of properties sold prior to auction increased from 23.1 per cent over the past five years, to 28 per cent during stage two restrictions, and 35.2 per cent for the two weeks ending July 4.

Across Melbourne, the portion of properties sold prior to auction also increased with each lockdown. Agents may have adapted to getting deals done prior to planned auctions, which may have become easier as property market conditions began to recover from October 2020.

More properties were also selling after the auction event during lockdown than the historic average, which again could be a function of the recovery in the market from October 2020, where auctions were more likely to eventually sell than pass in.

Across both Melbourne and Sydney, shorter lockdown periods have seen a higher portion of properties sell ‘at’ auction, as agencies have adopted and refined online or over-the-phone methods of hosting auctions.

Source: CoreLogic

CoreLogic suggested many real estate agents are now running both physical and online auction formats in parallel, making it easier for prospective buyers to participate in the auction event should restrictions be implemented.

Buyers may also have become more adept with these formats. However, CoreLogic indicated it is hard to separate the success of these online formats, with the fact that circuit-breaker lockdowns have coincided with periods of much stronger housing market demand.

In the 2020-21 financial year, CoreLogic estimates 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. 

In the context of closed international borders, it is perhaps difficult to fathom where the additional demand has come from, CoreLogic noted. 

Arguably, demand among first home buyers has been brought forward due to various government incentives such as the First Home Loan Deposit Scheme, HomeBuilder and various other state-based grants and stamp duty discounts. 

Record low mortgage rates have also been a key factor in stoking housing demand, potentially spurring pent-up demand from prospective buyers who would have otherwise remained inactive. 

Ms Owen suggested the housing market did not crash because government and institutional responses played a key role in market stability.

“A big part of why the housing market didn’t see further value declines was the enormous income support packages provided to households, the role of JobKeeper in maintaining employment relationships, low mortgage rates and mortgage repayment deferrals,” Ms Owen said.

“In the event of another extended lockdown, the future of housing demand and supply becomes much less certain if that same government and institutional support is not there.”

Key Findings

  • Auction results across Sydney and Melbourne have remained resilient in lockdown, particularly through circuit-breaker lockdowns
  • However, a larger than normal number of auctions are typically withdrawn, postponed or sold prior to the auction event.
  • Transaction activity slows markedly through lockdown periods. A ‘catch up’ in home purchases has been evident as restrictions ease.
  • Property values have remained resilient through lockdowns, and have seen strong growth as social distancing restrictions eased.
  • Stability of housing market values is likely subject to extensive government stimulus and institutional support for the sector; a factor which is far less certain going forward.

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