The harder the lockdown, the greater potential for swift property market recovery. That’s the major takeaway of a Domain webinar that was recently delivered by Senior Research Analyst, Dr Nicola Powell, and Domain National Managing Editor, Alice Stolz, who took a deep dive into what’s happening in Victoria.
Covering topics like consumer sentiment, online search behaviour and global trends, Dr Powell and Ms Stolz noted there had been dramatic changes in the property market courtesy of Covid-19.
Key points of the Domain webinar included:
- Countries that implemented severe lockdowns are enjoying the swiftest property market recovery
- New Zealand could offer an indication of Victoria’s property market future. After a hard and fast lockdown, they have witnessed a true V-shaped recovery
- While consumer confidence is generally down, by and large Australians still believe now is a good time to buy a property
- A decline in property price sentiment is being felt more widely in Sydney and Melbourne due to their position in the market cycle, and their exposure to immigration and job losses
- In Victoria, lockdowns have inspired a massive upswing in property searches and views-per-listing in both Greater Melbourne and regional areas
- The search term ‘home office’ has skyrocketed in Victoria, while ‘balcony’ and ‘garden’ have also increased dramatically.
Current economic conditions
Explaining the property market was always dependent on how consumers felt about their financial circumstances, Dr Powell said there had been a sizeable fall in confidence during the first national lockdown, and this confidence slump continued through to August.
One of the biggest surprises, however was that confidence fell more sharply in New South Wales during Victoria’s second lockdown.
“This highlights the fear of the unknown,” Dr Powell noted.
Meanwhile, when consumers were surveyed in August on whether now is a good time to buy property, overall there remained more optimists than pessimists, but Queensland pushed the sentiment into negative territory.
“The overall decline was driven by a substantial decline in Queensland, which reflects the weaker interstate demand expected in Queensland, and obviously the tourism demand,” Dr Powell explained.
“All other states showed an increase in confidence that it was a good time to buy.”
In terms of price expectation, Victoria and New South Wales clocked up the steepest falls. Dr Powell noted that partly reflected where these markets were in the price cycle, with Melbourne and Sydney tending to lead the market.
In Melbourne’s case, the property market had rebounded strongly after 2017, and prices had been at an all-time high prior to COVID.
Due to the fact markets with higher incomes and investment activity tend to be more sensitive to conditions, this combined to make the market more vulnerable, while factors like job losses, and exposure to overseas migration also contributed.
Online search behaviour in Victoria
Dr Powell explained search behaviour offered a fascinating insight into what Victorians are thinking, and a series of major trends emerged from Domain’s search data.
Increased interest in property
Overall, the interest in property soared in Victoria since the onset of COVID-19, with a dramatic increase in the number of views per property listing.
The places where people are searching also changed, Dr Powell noted, with distance between the home and workplace becoming far less important.
While regional listings enjoyed their highest number of views in four years, Greater Melbourne continued to attract the highest number of views per listing and some areas were more popular than others.
In Greater Melbourne, views per listing hit their highest point in May and it was the highest peak since October 2017. Views per listing have fallen since then but still remain higher than last year.
The areas enjoying the largest increase in interest were the Mornington Peninsula and southeast of Melbourne, while only a few areas across Greater Melbourne showed a decline in interest and they tended to be in the inner city.
In regional Victoria, there had been a “substantial increase” in listing views throughout COVID-19, Dr Powell said.
This interest peaked in July when it was at its highest in at least four years and was 44 per cent higher than 2019.
Regional areas attracting the greatest interest during COVID included Bendigo, Gippsland, Warrnambool, and Shepparton areas.
But while COVID certainly accelerated the search, Dr Powell reflected that demographic change was a gradual process and the trend towards regional areas had been growing over recent years.
“Prior to pandemic the move to regional areas already occurring particular from the west,” Dr Powell explained.
‘Home office’ a skyrocketing search term
When looking for property, the words “home office” skyrocketed in usage particularly during lockdowns.
“During lockdown 1 we saw a rapid increase in the use of the word home office. That declined as restrictions eased but has rebounded June to July by over 1000 per cent and then a further 30 per cent in July to August,” Dr Powell said.
Outdoor spaces were also front of mind for Victorian buyers. The word ‘balcony’ enjoyed a 50 per cent increase in Q2 over Q1, and the word ‘garden’ also grew in popularity.
Lessons from across the globe
Dr Powell then led webinar attendees on a virtual tour of the globe, comparing the property market recovery in different countries, while also looking at their level of lockdown.
Dr Powell kicked off in Hong Kong, with a historical focus on their recovery after SARS. She explained the transactions were down 30 per cent during that virus outbreak but rebounded strongly in the immediate period afterwards.
“In context however, the property market had had a downturn in the six years prior and was supported by economic recovery policies,” Dr Powell said.
During COVID, Hong Kong embraced a ‘semi-lockdown’ but after it concluded, June transactions were up 26 per cent on the June average in the five years prior.
With no restrictions, Dr Powell said there had been very little impact on the property market at all in Sweden.
After a lockdown that had been inconsistent, the USA’s property market recovery is proving gradual, Dr Powell noted.
There was a steep decline in new listings during the technical lockdown period in April and May, but even now they are still yet to see the number of listings they normally would at this time of year.
“You would expect the level of pent-up supply would build and as lockdown eased, the level of new listings would rise and eventually be higher than years prior,” Dr Powell said.
“There hasn’t been a significant uplift and they are still yet to get up to normal listings. It begs the question what has happened to all those listings? Their recovery is being hindered by a lack of new stock.”
The UK endured one of the strictest lockdowns in the world, with the housing market more or less suspended.
Since its reopening in May, Dr Powell said the property market had proved unseasonably strong, and had currently reach a five-year peak
“The commentary is this is not about the level of pent-up demand, it is reflecting changing decisions around housing needs,” she said.
“Large houses with three to four bedrooms are transacting much quicker than apartments, for example. Buyer demand is up 34 per cent. New supply is up 50 per cent in the last month.”
Meanwhile, the UK has suspended stamp duty, and Dr Powell noted this was assisting in the market recovery.
Explaining New Zealand offered probably the best comparison for Melbourne, Dr Powell noted they are currently enjoying a “true V-shaped recovery” after a significant drop in listings during their tough lockdown.
“As lockdown lifted, the market quickly rebounded. They have seen new listings rebound by June to almost above the years prior. In July listings were well above years prior,” Dr Powell said
Critically, buyer demand is also matching that seller activity.
Dr Powell said the level of sales quickly returned to above normal levels, particularly in July when it was substantially higher compared to years prior. In July sales volumes were 25 per cent higher than 2019.
“For Auckland it’s the highest number of sales they have seen in five years. For New Zealand overall if we take out Auckland, it’s the highest number of transactions in 15 years,” Dr Powell said.
“When you put both new supply and the sale volumes together, it really does suggest that New Zealand has seen a true V-shaped recovery in its housing market.”
As a result, New Zealand is also enjoying strong growth in housing prices across most areas.
So where is Melbourne at the moment?
Dr Powell noted Lockdown 1 saw April listings decline 45 per cent over the month, and they were down 24 per cent down year on year, while from April to June new listings rebounded 48 per cent.
At present, new listings are down 70 per cent both month-on-month and year-on year. On the upside, Dr Powell noted this would help to shield property prices.
In terms of sales, Dr Powell explained that prior to COVID-19 sales transaction were up on the year prior, but had fallen dramatically during Lockdown 1 and 2.
“But what I do want to note is that there is strong evidence after looking at all of those capital cities, that once the restrictions are eased and outbreaks are under control, new listings confidence increases rapidly,” Dr Powell said.
“When you compare all of the different types of lockdowns that we’ve seen across the globe … we have found the stricter the lockdown the stronger the recovery afterwards.”
You can view the full Domain webinar on how to navigate a COVID-affected property market here.