Australia is officially in a recession But that hasn’t discouraged buyers looking for a property as consumer confidence rises.
Treasurer Josh Frydenberg confirmed this week that Australia’s economy shrank 0.3 percent in the March quarter due to the double whammy of bushfires and the impact of COVID-19.
Economic growth also slowed to 1.4 percent over the course of the year Australian Bureau of Statistics (SECTION).
“This was the slowest growth for the year since September 2009, when Australia was in the midst of the global financial crisis and just beginning to see the expected economic impact of COVID-19,” said ABS Chief Economist Bruce Hockman.
Australian property prices are lower
To top it off, Australian property values were down 0.4 percent, falling for the first time since mid-2019, according to new CoreLogic data.
Despite the price drop, transaction activity in the market fell nearly 19 percent in May after falling 33 percent in April.
Total sales volume in the combined capitals rose 20.4 percent in May. It’s worth noting, however, that this is from a low base in April, when recorded monthly sales volume was at its lowest since 1991 excluding January results.
Another indication of market activity is the number of properties newly listed on the market.
When the overall inventory of properties in the market hits high levels, it’s a sign that supply is outweighing demand, according to CoreLogic research lead Tim Lawless, who added that “that doesn’t appear to be the case.”
If you look at the numbers, new registrations were up about 22 percent in the 28 days through June, but overall registrations were down 2.9 percent.
This means that new listings have not only risen, but have been absorbed, leading to a spike in home sales.
Lockdown restrictions are being eased and consumer confidence is rising
CoreLogic’s Australian research director, Eliza Owen, said that “shopper demand is outstripping the volume of new registrations”.
She attributes rising shopper demand to increased consumer confidence, thanks to the easing of lockdowns and lower coronavirus case numbers nationally.
“People may be more confident about the future of Australia’s economy, their personal finances and property purchases,” she said.
Mr Lawless agreed that consumer sentiment has been “steadily improving” since early April.
“As consumers feel more secure, households are better equipped to make high-engagement decisions like buying or selling a home,” he said.
“An increase in housing market activity should also support broader economic activity as housing turnover has positive implications for other sectors such as retail, construction and banking.”
Another factor behind increased buyer demand is that workers who have been hardest hit by the pandemic are less likely to have a mortgage, Ms Owen noted. Since the main load bearers are tenants rather than owner-occupiers, the housing market is showing less influence for the time being.
“With stability emerging in real estate transactions, it’s evident that additional housing incentives are less urgent among those who can already afford to own property, and is another reason to address housing costs for low-income earners,” she said .