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Mixed results for Q2: all unit prices fall, houses rise in select capitals

Results are in for the second quarter of the year and, according to Domain, all major capital cities saw unit prices fall across the June quarter, with house prices rising in Adelaide, Canberra, and Hobart.

It appears the various governmental stimulus packages, low interest rates, and mortgage pauses have helped steady the market, with price falls from the March quarter being minimal.

“Nationally house prices have dropped by 2 per cent and unit prices by 2.2 per cent over the June quarter,” said Domain Senior Research Analyst, Dr Nicola Powell.

“This is the first quarter to show the impact of COVID-19, reversing upward price swings in Sydney and Melbourne.

“While most capital cities declined, the falls have been minimal to-date as unprecedented government stimulus, mortgage holidays, low stock levels and record low interest rates shield values from any significant declines, helping to retain stability in the housing market.”

Domain’s report on the various capital cities is below, by Domain Senior Research Analyst, Dr Nicola Powell.

Sydney

“Sydney’s house and unit price recovery was abruptly halted over the June quarter, down 2 per cent and 1.9 per cent respectively.

“Houses have lost almost $23,000 and units just over $14,000 in the June quarter, the first quarter to show the impact of COVID-19.

“For houses, this is the first time prices have moderated since early 2019 and a year for units. Sydney was in an upswing prior to this interruption, highlighted by the strong annual growth, up by 10.5 per cent for houses and 7.3 per cent for units.

“House prices are $110,000 above the early 2019 trough but remain $55,000 below the mid-2017 peak. Unit prices are $50,000 above the mid-2019 trough but remain $52,000 below the mid-2017 peak.”

“Price falls to date have been minimal; significant government stimulus, mortgage holidays and low interest rates have helped to support home values.

“This is assisting many homeowners through economically challenging times and has kept distressed and urgent selling low.

“The risk to prices becomes greater once the stimulus measures cease and we face the fiscal cliff.

“While lenders have extended the mortgage pause for those under serious financial strain and the JobKeeper subsidy will be extended and tapered until the end of March next year, the outlook for prices largely depends upon how well the economy is tracking at the time stimulus ends.

“The full impact of the economic shutdown was evident in the June quarter. Sales activity, listings and clearance rates fell in April but were rebounding by June.

“It is clear confidence has lifted from the April lows, sellers have returned, and more buyers think now is a good time to purchase – nationally rising to a six-month high, according to the Westpac Melbourne Institute Index of Consumer Sentiment.

“Buyer interest has renewed from the April lows – those with job security are being enticed by low mortgage rates, government financial incentives and taking advantage of improved affordability.

“Price expectations have changed rapidly in recent months, with more vendors adjusting asking prices downwards to seek a timely sale.

“In June, 15.2 per cent of sellers reduced asking prices, three times higher than the same time last year. The proportion of properties discounted is a leading indicator of price movement, evidence that further price weakness lies ahead.”

Melbourne

“Melbourne’s record high house price achieved last quarter was short-lived: prices tumbled 3.5 per cent over the June quarter.

“House values have fallen $32,000 and units $9,000 over the first quarter to show the impact of COVID-19.

“Prior to this, Melbourne house prices had made a full recovery from the 2017-19 slump. This quarter marks the first fall since early 2019 and is the deepest quarterly fall of all the major capital cities.

“Affordability appears to be front of mind for buyers, with more substantial falls in the city, the inner east and inner south, while the outer areas remain stable or have risen.

“Units have held up better than houses, falling a more moderate 1.7 per cent over the June quarter. It is the opposite trend for Melbourne units, with the price slump concentrated in the affordable areas of the south east and west.

“Home owners have been provided with a lifeline during this economically challenging time through the intervention of the banks and government: the JobKeeper subsidy as well as a more generous JobSeeker payment which have both been extended, along with the banks offer to pause mortgages.

“These will minimise the number of urgent or distressed sales, which will in turn support prices. The risks become far greater once these initiatives cease. That said, evidence suggests further price weakness – in June 13.4 per cent of sellers reduced their asking price, five times higher than the same time last year.”

“Melbourne’s property market outlook has adjusted in recent weeks as the city enters its second lockdown. The full impact of the first economic shutdown was clearly evident in the June quarter.

“Sales activity, listings and clearance rates fell in April. However the rebound was swift as restrictions eased, confidence lifted from the April lows, vendors returned, and more buyers decided it was a good time to purchase – nationally rising to a six-month high.

“The second lockdown will stall this momentum temporarily.”

Brisbane

“Greater Brisbane house prices fell 1.4 per cent over the June quarter.

“This is the first quarterly fall in a year and the steepest in almost nine years. However house prices remain higher compared to last year, marking seven-and-a-half years of annual capital growth.

“A two-speed property market has developed across the LGAs with Brisbane City, Moreton Bay, Redland, Scenic Rim and Somerset house prices falling over the quarter, while Ipswich grew, and Logan remained stable.

“Prior to COVID-19, there was promising growth in prices for Greater Brisbane.

“Although this has reversed in the June quarter, the fall in prices to date has been minimal considering the economic aftermath of border closures and shutdowns.

“An initial pull back in seller and buyer activity during the lockdown acted to underpin prices, government financial support has kept distressed or urgent sales minimal, and incentives have encouraged buying journeys to begin.

“The outlook for residential property has improved vastly in recent weeks. Sentiment towards housing and the purchase of a home has bucked the overall more negative sentiment around the broader economy.

“Nationally the time to buy a dwelling pushed to a six-month high according to the Westpac Melbourne Institute Index of Consumer Sentiment.

“Affordability is clearly front of mind, with the biggest jumps in Queensland, South Australia and Western Australia.”

“Sunshine Coast and Gold Coast housing values outperformed Greater Brisbane over the June quarter.

“Gold Coast houses pushed to a new record of $660,000 following a 1.5 per cent quarterly growth, while houses on the Sunshine Coast nudged marginally lower.

“Unit values held across both cities over the June quarter, with Sunshine Coast units at the record achieved last quarter.

“Despite the devastating impact of the bushfires and the coronavirus pandemic housing values are steady illustrating the desirability of coastal lifestyle regions.”

Adelaide

“Adelaide was one of only three cities to record house price growth over the June quarter, along with Hobart and Canberra.

“While it was a modest 0.2 per cent lift, this has pushed house prices to a record high of $553,036. This is a better outcome than the other capital cities that plunged into declined, reinforcing the stability of the Adelaide housing market even amid the economic fallout of COVID-19.

“However, unit prices slipped 2.9 per cent over the June quarter, reversing part of the strong growth recorded over the first three months of the year, to $319,266.”

“Low interest rates, unprecedented government stimulus and extended mortgage repayment relief measures have sheltered house prices from any substantial falls to-date.

“A pullback in buyer and seller activity throughout the height of the lockdown also helped. Economic headwinds could still disrupt Adelaide’s market stability, with weak employment prospects a persistent thorn in the economy which will heighten due to health crisis.

“However South Australia is less reliant on international tourism than other states and more reliant on interstate tourism. Once borders reopen, the state could benefit from the increase in Australians taking holidays locally.

“The outlook for residential property has improved vastly in recent weeks. Sentiment towards housing and the purchase of a home has bucked the overall more negative sentiment around the broader economy.

“South Australia had one of the biggest improved sentiment towards the time to buy a dwelling which reached a six-month high nationally.

“Affordability is clearly front of mind of mind for prospective buyers, with Adelaide offering one of the lowest purchase prices of all the capitals as well as offering buyers a great lifestyle.

“Demand could be increased by Australia’s success in dealing with the global pandemic compared to other countries, making it an attractive destination to reside, particularly towards lifestyle regions.”

Perth

“House prices fell modestly over the June quarter, reversing the growth trend over the prior two quarters.

“While a house price recovery is still on the cards for Perth, the economic fallout of COVID-19 appears to have paused the beginning of the rebound.

“House prices remain above the mid-2019 trough marginally by 0.1 per cent but are 15.2 per cent below the late 2014 peak.”

“Unit prices dropped 4.9 per cent over the quarter, losing almost all the strong gain recorded over the previous quarter, pushing unit values down marginally 0.1 per cent over the year.

“This has created a window of opportunity for buyers, with values only 0.7 per cent above last years trough but a staggering 20.7 per cent lower than the mid-2014 peak.

“Perth’s housing recovery may have paused in recent months although prices remain relatively stable considering the economic impact of the current health crisis.

“Improving commodity prices, particularly the states two biggest exports gold and iron ore, will be a pillar of support for the economy. A rapidly shrinking supply of advertised listings will also help to rebalance the market.”

Hobart

“Hobart house prices pushed to new heights over the June quarter. Hobart was one of three cities to see houses rise in the three months to June. For the first time on record, it is now more expensive to purchase a house in Hobart than it is in Perth and Darwin.

“While values have ticked higher the momentum has slowed from the rapid pace of growth seen in recent years. House prices are 57.3 per cent and units 70 per cent higher than five years ago, providing home owners and investors the strongest capital growth of all the major capitals during this time.

“The loss of momentum in the housing market is expected given the exposure of Hobart’s economy to tourism, the industry hardest hit by the coronavirus pandemic.

“Risks to the housing market remain particularly if the unemployment rate stays persistently high once government stimulus measures begin to taper.

“While there is no increase in urgent or distressed selling currently, risks are ahead, particularly given the extraordinary value growth and low average wage.

“The health crisis has also opened discussions for the government to undertake significant economic reform including the issue of stamp duty. If stamp duty is abolished it could have a positive impact on sales activity.

“Demand could be further fuelled by Australia’s success in dealing with the global pandemic compared to other countries, making it an attractive destination to reside. Together with Hobart’s lifestyle and relative affordability compared to other major cities, this could be a drawcard for those keen to relocate.”

Canberra

“Canberra house prices bucked the downward trend seen in most other cities and continued to rise over the June quarter.

“The strong quarterly growth pushed median house values to a record high, breaking the $800,000 mark. This is also the first time Canberra house prices have pushed above the median value of the combined capitals since 2013. Unit prices slipped 1.3 per cent over June, a marginal fall compared to the steep decline of the previous quarter.

“The housing market continues to operate on different speeds. House prices have risen 31.4 per cent over the past five years while unit prices increased 5.8 per cent.

“The ACT has not felt the economic impact of the COVID-19 crisis to the same extent as other cities, though the jobless rate has risen, it remains the lowest compared to other jurisdictions, supported by the high public sector employment base, where job losses have been minimal, and industries supporting the public sector.

“A resurgence of first home buyers enticed by low interest rates and government incentive schemes have helped many on to the property ladder and supported housing activity.

“Stamp duty waivers on land and off-the-plan purchases, together with the HomeBuilder grant could continue to lure buyers.”

Darwin

“Darwin’s house prices fell over the June quarter reversing the positive trend that had started to emerge.

“Affordability has vastly improved for first home buyers, house prices are just over $162,000 lower than the 2013 high, although they are now almost $13,000 above the late-2019 trough.

“Darwin remains the most affordable city to purchase a house, a title it claimed last quarter for the first time since 2002. It appears units are yet to find a price trough falling further over the quarter, currently almost $245,000 below the early-2016 peak.”

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