AUGUST 2020 PROPERTY MARKET UPDATE
July auction clearance rates absorb rise in new listings
- CLEARANCE RATE ABOVE 58% DESPITE 14% INCREASE IN NEW LISTINGS
- MEDIAN DWELLING VALUE DIPS -0.9% TO $866,110
- SYDNEY DWELLING VALUES STILL UP 12.1% OVER JULY 2019 AND 2.2% YTD
- RBA SAYS ECONOMIC “RECOVERY UNDERWAY IN MOST OF AUSTRALIA”
(CoreLogic and REIA figures. RBA Charts)
Displaying continuing resilience in July, Sydney’s property market easily absorbed a 14% increase in auction listings, registering only a 0.1% drop in the overall clearance rate to 58.2% (60.2% for houses and 54.5% for units). Home auction prices dipped slightly (0.7%) to $1,475,000, while prices for units ticked up 0.1% to $900,000. These results are consistent with the industry’s 60% auction clearance rate benchmark for price appreciation: above 60% and prices generally rise, below 60% and prices can dip.
This increase in supply has leveled off the strong rise in housing prices since their 2019 trough. Sydney median values dipped -0.9% to $866,110, but are still up 2.2% YTD. This is significant, given recent higher savings rates and negative inflation-adjusted cash rates for term deposits. Housing remains a trusted store of value for most Australians.
Stability in the housing market is a common objective for all parties. Banks have been quick to pass on Australia’s record-low fixed and variable interest rates to owner-occupiers and investors. Importantly, almost 60% of their funds are sourced from domestic deposits, which continue to rise. Unlike previous economic downturns, local banks are extremely well-capitalized and profitable. Non-performing assets have not ticked up. This has allowed credit to remain available to qualified borrowers, and removes the risk of a harmful ‘credit crunch’ for Australia’s economy.
August 4 RBA Statement – A Show of Confidence in the Australian Economy
RBA Governor Philip Lowe had some encouraging news in his latest policy decision statement.
“The (economic) downturn is not as severe as earlier expected and a recovery is now underway in most of Australia. The prices of many assets have risen substantially. The board’s actions are keeping funding costs low and assisting with the supply of credit to households and businesses. This accommodative approach will be maintained as long as it required.”
The RBA foresees an uneven and bumpy recovery. The key word here is recovery. Despite obvious headwinds and challenges, the drop in housing seen in 2018 and 2019 has not carried through into 2020. If anything, consumers have focused their spending even more strongly on home and family. This trend will not change soon.
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