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Beat The Seagulls To The Chip

Beat The Seagulls To The Chip
September 22, 2020 Propertyology Head of Research and REIA Hall of Famer, Simon Pressley

In capital cities and regions, property values and rents have increased in almost every Australian location over the last three months (ending September 2020). And there’s a better than average chance that many markets will be red-hot by summer time!

I appreciate that people might be surprised by what they’ve just read, but they really shouldn’t be.

Just six months ago, immediately before this germ started disrupting our lives, Australian real estate was on the cusp of beginning the biggest property boom seen in this country in more than a decade.

The (pre-Covid) national under-supply of housing available for resale and rent is just as applicable now as it was earlier this year. A germ doesn’t diminish society’s demand for shelter. And the cost of credit, a key component to transacting in shelter, has never been cheaper. Pause and let this paragraph sink in.

Yes, there is a segment of society whose income has been adversely affected by the germ. But there are plenty of Australians that have been largely unaffected.

Total real estate transaction volumes are (understandably) lower than normal however, the ratio of active property buyers to what’s available is very tight. That’s what puts upward pressure on asset values and rents.

For much of Australia, the cocoons opened up back in May and people are getting on with life, as we all should.

While the lemon-suckers of life continually point out ‘problems’, the do-ers and achievers are leading the way and it’s already showing up in a number of key metrics.

As I’ve pointed out in past blogs, history is proof that the bigger the challenge presented to society the stronger the response becomes. Human spirit is an incredibly powerful force!

It is crystal clear from the graphic below that the total number of people employed, the number of new jobs advertised, and retail expenditure are all on a strong, positive trajectory.

Instead of being preoccupied with the hourly updates of Covid-counts and the political grandstanding of State Premiers, just look at the positive progress being made within just a few months:

  • According to ABS data, from the end of May to the end of July, Australia had added 287,000 jobs;
  • 93.2 percent of the workforce have a job and the national unemployment rate fell to 6.8 percent in August;
  • According to APRA, the national value of home loans on repayment deferrals as at the end of July had fallen to just 9 percent. The country has opened up further since then, Melbourne’s lockdown situation is improving fast, and state border restrictions are relaxing. Only a lemon-sucker will persist with using that good-for-nothing ‘fiscal cliff’ term;
  • After reaching an all-time low of 54,000 positions available in mid-April, the total volume of jobs advertised nationally continues to rebound strongly and equated to 115,000 positions in mid-September;
  • The volume of infrastructure projects in the pipeline is astronomical;
  • Mining investment has increased by 8 percent from 12-months ago;
  • Plentiful water supply is a great thing for our agriculture and food manufacturing sectors;
  • Investment in renewable energy and defence force fleet manufacturing is off the charts;
  • Domestic tourism in various parts of Australia is going gang busters. One of several great gifts that this germ has given us is a pathway for people to explore more of this great country. We are aware that accommodation bookings are already sky-high in some locations and they’ll get much busier in coming months.

As each day passes, restrictions are relaxing, connections between employer and employee are improving, and community confidence is returning.

The real estate temperature gauge is rising with the weather. Propertyology’s buyer’s agents are experiencing it with firsthand experiences in various locations across Australia.

As forecast by Propertyology when the germ arrived in March, the record low cost to service a mortgage and incredibly low volume of real estate available for sale and rent is underpinning property markets nationally.

Prices held firm during the March-April national lockdown and have subsequently trickled upward, of course with the odd exception.

Aside from a very brief stint in 2009, the volume of first home buyers over these last few months has reached a record high.

Existing owner-occupiers are also upbeat and housing finance data supports what buyer’s agents are seeing in the field. The Australian public are increasingly appreciating that a return to sensible credit policy and dirt-cheap interest rates is a great platform to upgrade the family home.

The residential construction sector is currently run off its feet. Large parts of Australia (literally) can’t supply enough new blocks to keep up with demand for the federal government’s Home Builder stimulus package.

As for property investors, the general conditions are salivating. It really doesn’t get any better than rental incomes (yields) of 5 percent against an interest expense of circa 3.25 percent.

The current levels of rental under-supply are at crisis point in many parts of Australia [here’s where].

Each week, property managers are reminding Propertyology’s buyer’s agents that their investment properties are being leased within days of being advertised, they frequently have multiple tenant applications and rents are rising.

Conditions in Sydney and Melbourne are totally bucking the trend for property market conditions in the rest of Australia.

While plenty of Australians were cuddled up in Covid hibernation for much of autumn and winter, some property investors identified the window of opportunity to buy while less competition was around.

Those investors that we helped are in a situation wherein rental incomes are covering 100 percent of investment expenses and they will have already seen a little bit of capital growth in just a few months.

The best time for one to invest in their future is always as soon as one can afford to. The most important question is ‘where’, not ‘when’.

With underlying property market fundamentals being as solid as they are right now, Blind Freddy can see that the current upward pressure on real estate is only going to get even tighter with Covid restrictions progressively reducing, a variety of stimulus initiatives kicking in, and more buyers coming out of their cocoons.

From what Propertyology’s buyer’s agents are experiencing, it will not be long before market conditions become akin to seagulls fighting over a chip.

Get organised and get in touch with us.

Propertyology are national buyer’s agents and Australia’s premier property market analyst. Every capital city and every non-capital city, Propertyology analyse fundamentals in every market, every day. We use this valuable research to help everyday Aussies to invest in strategically-chosen locations (literally) all over Australia. Like to know more? Contact us here.