Despite the disruption the global pandemic continues to inflict on freedoms and the economy, the Australian property market is still going gangbusters, with home sales continuing to outpace new listings.
According to CoreLogic, the sales-to-new listings ratio hit 1.4 over the three months to July, meaning that for each dwelling added to the market, more than one gets sold. This ratio has trended ever since June 2020 when the Federal Government announced the HomeBuilder incentive package.
CoreLogic head of residential research Eliza Owen said the sellers’ market is being driven by a surge in demand for homes, influenced by the following factors: historically low mortgage rates, an increase in savings, and more activity from first home buyers and investors.
“Mortgage rates are one of the most important determinants of housing demand, and in the current climate, where GDP is once again expected to decline, the RBA will likely facilitate a low-rate environment for longer,” Ms Owen said.
Households are also more confident to spend on housing due to the windfall in savings, which was driven by the decline in consumption amid the lockdowns and the financial support from the government. Household savings peaked at 22% of household income during the second quarter of the year, substantially higher than the decade average of 7%.
“Combined with a range of incentives for home purchases introduced through 2020, increased savings levels may have bolstered borrower deposit levels, triggering additional sales since the onset of COVID-19,” Ms Owen said.
First-home buyer incentives and other state-based grants have encouraged more first-timers to break into the housing market. Ms Owen said the participation of first-home buyers in the market provides a clearer understanding of the supply and demand dynamics.
“First home buyer activity creates additional housing demand without adding new advertised stock to the market,” she said.
At the start of the year, the number of loans to first-home buyers peaked at 16,260. This was almost double the series average of monthly first home buyer loans secured at 8,731. While commitments from the segment have started to taper down, they remained 58.8% above the series average through June.
Activity from investors also trended higher since mid-2020. Since then, however, financing commitments from investors has been increasing. There were 18,625 secured home loans for investor property purchases through June, which is a 74.8% increase on commitments in the same month of 2020.