Boom persists amid rising stock levels
October saw the end to lockdown and the unofficial start to the spring property market.
Onsite auctions and open houses recommenced whilst APRA’s move to slow the market took hold. As expected, stock levels jumped providing buyers with a decent range of stock for the first time in 2021.
Days on market remained tight, although it could be said that houses performed better than apartments.
Auction clearance rates dropped slightly on the increase in stock levels but are still well above where they were this time last year. A slight dip in auction clearance rates during the peak of the spring stock is seasonal and temporary. Any excess stock is absorbed as we get closer to Christmas and new listings are held off until the new year.
According to Core Logic’s latest numbers, Sydney houses are up 30.37% for the year whilst apartments are up 13.55%.
In October, houses jumped 1.62% as apartments rose by 1.21%
The fact the market is still rising after 10 months of solid gains is remarkable in itself.
APRA the banking regulator will be hoping their efforts to cool (not crash as some have suggested) the housing market will show up in the data as we head into Christmas.
If the market continues to rise at this rate into the New Year, further efforts to cool the market will be implemented by APRA.
The RBA has stated time again that interest rates won’t rise until 2024. In late October, the bond market has fully priced in interest rate rises in 2022. Inflation readings in the economy are high and markets are overheating.
With a Federal Election due between now and May 2022, the timing of any further tightening by APRA and/ or rate moves by the RBA will be interesting.
Buyers can often mistake this seasonal dip in auction clearance rates as fundamental and meaningful. Given interest rates are set to move earlier than expected, there is no shortage of property bears again calling for a dramatic 20% to 30% market crash.
You can expect to see regular commentary and sensationalist views being pushed as talk of rate rises increase. It’s worth noting the surge in stock will tighten again very quickly in December and neither APRA nor the RBA has a desire or mandate to crash the housing market.
Owner occupiers upgrading are still the biggest driver of the property market whilst Baby Boomers are continuing to cash in on strong prices and sell down the family home.
We have noticed an increase in demand from investors who are chasing a yield on their cash holdings. The investment demand has been centred mainly on sub $1.2 million properties, primarily apartments. Older established apartments with less amenities and lower strata levies seem to be the most popular at this stage.
Investors can probably bet on increased rental returns in 2022 as the borders reopen, however capital growth is unlikely to match what has occurred in 2021.
If one is investing for the long term, a short term increase in yield that benefits cashflow is as desirable as capital growth. Investors would naturally hope and expect to experience growth over the long term but a short term jump in rental returns will be a bonanza for many investors who have found the world of low yield investments frustrating.