The housing market through pandemic lockdowns - Australia | Released July 2021 - CoreLogic
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The housing market
through pandemic
lockdowns
Australia | Released July 2021
Data
1 to June
© 2021 2021 Inc. All Rights Reserved.
CoreLogic,Introduction How does the housing market react to pandemic lockdowns? As the delta variant of COVID-19 has spread in Australia, Greater Sydney will soon enter a third week of lockdown. With a low vaccination rate, and slow vaccine distribution, temporary, pandemic-induced lockdowns may continue to be a norm for Australians through 2021. This note highlights trends that emerged from the housing market amid COVID-19- induced lockdowns over the past 15 months, which might inform our expectations as to how the housing market is affected. The report covers several key trends: Auction results across Sydney and Melbourne are considered in lockdown conditions. The proportion of sold properties remained relatively resilient, particularly through circuit-breaker lockdowns, although a larger than normal number of auctions are typically withdrawn, postponed or sold prior to the auction event during these periods; Transaction activity slows markedly through lockdown periods, however a ‘catch up’ in home purchases is evident as restrictions ease; Property values have remained resilient through lockdowns, and have seen strong growth as social distancing restrictions eased; and, The stability of housing market values is likely subject to extensive government stimulus and institutional support for the sector; a factor which is far less certain going forward. 2 © 2021 CoreLogic, Inc. All Rights Reserved.
Auction results have generally improved with
each lockdown
Auction outcomes have gradually become more favourable to Sydney. For Melbourne, the proportion of auctions
sellers through lockdown. This is seen across Sydney and withdrawn became smaller with each lockdown. Withdrawn
Melbourne auction results over time (Sydney and Melbourne are properties are counted as an unsuccessful auction result, and
the key focus for this analysis, as these markets have comprised as such have weighed on the clearance rate, even as a lower
approximately 85% of all capital city auctions held since the portion of properties had a passed in result.
beginning of 2020).
Figures 1 to 4 show the outcomes in Melbourne and Sydney for Fig. 1 Melbourne auction outcomes through
all auctions collected by CoreLogic under different social COVID-19 restrictions
distancing conditions, as well as the average weekly volume of
Passed In Sold After Sold At Sold Prior Withdrawn
auctions through each period.
The columns on the far left of each chart shows 5 years’ worth of
2.7%
auction results before the onset of COVID-19, as well as auction 12.9%
25.3% 25.0%
results through various periods of restrictions since. A few 37.8%
observations can be made from the data: 54.3%
Longer social distancing periods had far lower average 55.3% 32.2% 34.3%
auction volumes. This is presumably a result of vendors and 26.7%
real agents being more selective about the kinds of 23.4%
1.3%
properties they were confident in taking to auction. This is 20.8% 36.2% 32.1%
also reflected in lower rates of properties ‘passing in’, along 9.0%
27.8% 1.9% 2.1%
with a larger number of cancelled or postponed auctions. The 11.3% 12.6% 2.2% 1.7%
4.1% 6.9%
cancellation of auctions may reflect agents only auctioning Series average Stage 2 Stage 3 and 4 Circuit Breaker - Circuit Breaker -
properties during lockdown that they are confident will sell. (Pre-COVID19) restrictions restrictions Mid February start of June
2021 2021
Across Melbourne, auction volumes were most depleted
toward the tail-end of stage 4 restrictions, through
Fig. 2 Melbourne - average weekly auction
September and October 2020. This was partly because
volumes amid COVID-19 restrictions
property was harder to sell amid rules limiting physical home
inspections and on-site auctions. Additionally, an extended
economic downturn across the state, and falling property
prices, made selling conditions more challenging. 1,156
More properties are withdrawn through lockdowns. As
well as lower numbers of properties listed with an auction
805
campaign, a higher portion of properties were withdrawn
from auction altogether in periods of lockdown, either 633
576
transitioning to private treaty listings, or a pause in the
campaign. Relative to the previous 5 years, the portion of
withdrawn auctions has remained elevated in Melbourne,
and were somewhat elevated in stage 2 restrictions across 207
Series average Stage 2 Stage 3 and 4 Circuit Breaker - Circuit Breaker -
(Pre-COVID19) restrictions restrictions Mid February start of June
2021 2021
3 © 2021 CoreLogic, Inc. All Rights Reserved.• A higher portion of properties sold prior and sold after For the week ending July 11th, Sydney is expected to see
auction during lockdown. For Sydney, the proportion of relatively low auction volumes at 797 properties scheduled.
properties sold prior to auction increased from 23.1% over However, the clearance rate is likely to be buoyed by a higher
the past 5 years, to 28.0% during stage 2 restrictions, and portion of properties selling prior to auction, and a pivot to
35.2% for the two weeks ending 4th of July. Across Melbourne, virtual auctions. With agents finding ways to navigate the auction
the portion of properties sold prior to auction also increased market amid social distancing restrictions, the clearance rate is
with each lockdown. Agents may have adapted to getting more likely to reflect market sentiment than be directly impacted
deals done prior to planned auctions, which may have by a shorter term lockdown.
become easier as property market conditions began to
recover from October 2020. Fig. 3 Sydney auction outcomes through
COVID-19 restrictions
More properties were also selling after the auction event
during lockdown than the historic average, which again could Passed In Sold After Sold At Sold Prior Withdrawn
be a function of the recovery in the market from October
2020, where auctions were more likely to eventually sell than 10.0% 13.7% 14.5%
pass in.
23.1%
Circuit-breaker lockdowns saw a higher portion of 28.0%
35.2%
properties sold ‘at’ auction than longer restrictive
periods. Across both Melbourne and Sydney, shorter
lockdown periods have seen a higher portion of properties 44.1%
32.3%
sell ‘at’ auction, as agencies have adopted and refined online
36.3%
or over-the-phone methods of hosting auctions. Many real
1.9%
estate agents are now running both physical and online 0.8%
auction formats in parallel, making it easier for prospective 22.0% 24.0% 3.1%
buyers to participate in the auction event should restrictions 10.9%
be implemented. Buyers may also have become more adept Series average (Pre- Stage 2 restrictions Sydney lockdown - June /
with these formats. However, it is hard to separate the COVID19) July 2021
success of these online formats, with the fact that circuit-
breaker lockdowns have coincided with periods of much
Fig. 4 Sydney - average weekly auction
stronger housing market demand.
volumes amid COVID-19 restrictions
For the two weeks ending 4th of July, Sydney has seen 74.6% of 916
scheduled auctions achieve a successful result. This was slightly
lower than the previous week ending 20th of June, when 76.8% of
auctions saw a successful result, and below the previous 5 year
642
period, where 77.2% of results have been successful.
553
Of the Sydney auctions that cleared through the past two weeks,
36.3% sold at auction, while 35.2% were negotiated prior.
Withdrawn auctions, which are counted as an unsuccessful
auction result, represented 14.5% of auction outcomes for the
week.
Series average (Pre- Stage 2 restrictions Sydney lockdown - June /
COVID19) July 2021
4 © 2021 CoreLogic, Inc. All Rights Reserved.Demand declined during lockdowns, but so did
advertised supply
Through lockdowns, transaction activity has been far more Ordinarily, such a sudden fall in demand would see greater
volatile than sales values. From March to April of 2020, which vendor discounting and a fall in property prices. Instead
coincided with the onset of stage 2 restrictions nationally, the however, new advertised supply also fell. New listings added to
volume of sales fell -33.9% across the country. the market declined -44.7% through the month of April 2020.
The enormous decline in the number of sales was not only While it is true that home buying activity takes a hit during
because properties became more difficult to purchase. The initial lockdowns, it is important to note that listings activity also
economic shock caused by COVID-19 lockdowns may have declines, as home owners recognise lockdowns are not ideal
lowered price growth expectations and pessimism around real times to sell. As noted in our initial response to the onset of
estate performance. This was reflected in the monthly ‘time to COVID-19, we expected lockdown conditions to resemble
buy a dwelling’ index, a sub-component of the consumer ‘holiday periods’, where both buyers and sellers step back from
sentiment index produced by Westpac and the Melbourne buying and selling decisions.
Institute, which fell -26.6% in the month of April 2020.
However, it is worth noting that listings levels have largely
This sentiment was not helped by initial expectations for the remained subdued, even as restrictions have lifted, and COVID-19
property market, where consensus among banks was building case numbers have remained relatively low. This is
that national property values could fall 10%, and worst-case demonstrated in figure 5, which shows the national, rolling 28-
scenarios suggested prices could fall by a third. day count of new listings through 2020, compared with the
previous, five year average.
Fig. 5 Rolling 28-day count of new listings advertised for sale, National
5-year average (2015-2019) 2020 2021
60,000
50,000
40,000
30,000
20,000
10,000
National Stage 2 Melbourne stage 3 and 4
0 restrictions restrictions
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
5 © 2021 CoreLogic, Inc. All Rights Reserved.Extended lockdowns, both nationally and across Melbourne, saw distancing rules. CMA activity may fall further as the lockdown is
very subdued listings activity. It was not until 2021 that new extended to the 16th of July.
listings added to the market have trended closer to the historic
average. Even so, new listings added to the market currently still
do not match levels of demand. Through 2021, as housing
demand surged in recovery from COVID-19 lockdowns, CoreLogic
Fig. 6a Index of CMA volumes, SA (indexed
has observed a greater volume of sales than new listings added
to 1 on the 12th of November, 2020)
to the market. This has resulted in an especially low level of total
advertised stock, where the total volume of listings across 1.2
Australia is currently 139,897. The previous 5 year average level 1
of total stock for this time of year is 201,442. 0.8
0.6
In shorter, circuit breaker periods of strict social distancing,
vendor activity becomes temporarily subdued, but then seems to 0.4
resume swiftly as lockdowns are lifted. This is shown in the 0.2 Adelaide
lockdown
indices across figure 6. 0
12 Nov 20
13 Nov 20
14 Nov 20
15 Nov 20
16 Nov 20
17 Nov 20
18 Nov 20
19 Nov 20
20 Nov 20
21 Nov 20
22 Nov 20
23 Nov 20
24 Nov 20
25 Nov 20
26 Nov 20
27 Nov 20
28 Nov 20
Each index tracks a rolling, seven-day count of ‘Comparative
Market Analysis’ reports (CMA reports) generated by real estate
agents using the RP Professional platform. This has proved to be
a leading indicator of new listings activity, because these reports Fig. 6b Index of CMA volumes, Victoria
are used by agents to research property and pitch for new (indexed to 1 on the 6th of February, 2021)
listings.
Looking at the index for South Australia, CMA activity saw a
1.2
decline of -42.4% from the 12th of November to the 22nd of
1
November, as Adelaide went into a three day lockdown. CMA
0.8
activity can back swiftly. Although report volumes did not see a
full recovery within one week of the lockdown lifting, this is likely 0.6
because it coincided with a seasonal decline in transaction 0.4
activity, which regularly occurs toward the end of the year. 0.2 Melbourne lockdown
0
Looking at Victorian CMA activity through Melbourne’s circuit
06 Feb 21
07 Feb 21
08 Feb 21
09 Feb 21
10 Feb 21
11 Feb 21
12 Feb 21
13 Feb 21
14 Feb 21
15 Feb 21
16 Feb 21
17 Feb 21
18 Feb 21
19 Feb 21
20 Feb 21
21 Feb 21
22 Feb 21
23 Feb 21
24 Feb 21
breaker lockdown (between the 13th and 17th of February 2021),
the volume of CMAs generated had seen full recovery in report
volumes within one week of the lockdown lifting.
Fig. 6c Index of CMA volumes, NSW
Interestingly, the decline in CMA generations has not been as (indexed to 1 on the 19th of June, 2021)
severe across NSW as of yet. Since the start of the Sydney-wide
lockdown, the rolling seven-day count of CMAS has fallen -10.1%
through to the 6th of July, potentially reflecting that fact that 1.4
private property inspections are permitted under the social 1.2
1
0.8
0.6 Sydney lockdown begins
0.4
0.2
0
01 Jul 21
02 Jul 21
03 Jul 21
04 Jul 21
05 Jul 21
06 Jul 21
19 Jun 21
20 Jun 21
21 Jun 21
22 Jun 21
23 Jun 21
24 Jun 21
25 Jun 21
26 Jun 21
27 Jun 21
28 Jun 21
29 Jun 21
30 Jun 21
6 © 2021 CoreLogic, Inc. All Rights Reserved.Lockdowns were followed by ‘catch up’ dwelling
purchases
One of the extraordinary elements of housing market Another source of housing demand in the past 12 months may
performance in recent months has been strong sales volumes. In well be the sales that were postponed, or made more difficult,
the 2020-21 financial year, CoreLogic estimates there were through the first half of 2020 due to COVID-19 restrictions.
approximately 582,900 transactions nationally, compared to a
Figure 7 shows dwelling sales volumes nationally through 2020,
decade average annual volume of 455,346. This is the highest
with the exception of Victoria, where lockdowns extended and
annual sales volume observed since February 2004.
further impacted sales volumes in the second half of 2020.
In the context of closed international borders, it is perhaps
difficult to fathom where the additional demand has come from. Outside of Victoria, there is a clear asymmetry in sales volumes in
the first and second half of 2020, which is not as pronounced in
Arguably, demand among first home buyers, which
the average monthly sales volumes over the previous 5 years.
demographically are currently in very high numbers, has been
brought forward due to various government incentives such as Sales volumes fell -10.1% between February and March 2020,
the first home loan deposit scheme, HomeBuilder and various where the 5 year average shows sales volumes would typically
other state-based grants and stamp duty discounts. increase 12.2% around this time of year.
Record low mortgage rates have also been a key factor in stoking
housing demand, potentially spurring pent-up demand from
prospective buyers who would have otherwise remained
inactive.
Fig. 7 Monthly sales volumes, national excluding Victoria
2020 Previous 5 year Average
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
December
March
August
October
April
June
July
February
September
November
May
January
7 © 2021 CoreLogic, Inc. All Rights Reserved.Between March and April 2020, sales volumes fell a further - It is reasonable to assume that for a sizeable financial and
31.5% across Australia (excluding Victoria), beyond the -13.3% temporal commitment such as housing, a period of lockdown is
that sales volumes would typically decline over the month of unlikely to deter a housing purchase altogether, unless
April. household income is severely affected. Therefore, a similar
phenomenon may be expected in the housing market.
Assuming these months had followed recent average changes in
volume, there were 18,000 fewer sales in this period due to Additionally, consumers may have been more incentivised to
COVID-restrictions. As restrictions started to ease, the monthly purchase housing following the end of stage 2 restrictions, as the
growth rate of sales from May to December 2020 averaged far households saved 22.0% of income through the June 2020
higher than typical monthly growth rates in the previous 5 years quarter (compared to a then decade average of 7.0%), and a
(figure 8). Again, Victoria did not follow this trend due to range of government incentives were introduced for the
extended lockdowns in the second half of the year. purchase or construction of new homes. This has likely been a
key part in the recovery of sales volumes across Melbourne,
Assistant Governor with the RBA, Luci Ellis, noted in a recent
where temporary stamp duty discounts are thought to have
address that durable goods appeared to have seen a ‘catch up’ in
created a surge in sales up to the 1st of July.
consumption after social distancing restrictions have eased,
because timing of durable goods purchases can shift to periods
after lockdown. This was noted particularly in the case of motor
vehicle sales.
Fig. 8 Monthly change in sales volumes, National excluding Victoria
2020 Previous 5 year Average
33.9%
29.8%
28.0%
19.3%
15.2%
12.2% 12.7%
8.6% 8.2%
6.2%
4.0%
3.1% 3.2%
3.2%
-1.4% -2.1%
-7.3%
-10.1%
-13.3% -12.0%
-19.3%
-31.5%
August
October
December
March
April
June
July
September
February
November
May
8 © 2021 CoreLogic, Inc. All Rights Reserved.Ultimately, the months following lockdowns have not only available for low-deposit home loan schemes), which may
resulted in a resumption of sales activity, but potentially the continue to draw forward first home buyer demand across
additional sales that would have otherwise transacted during Sydney as restrictions are eased.
lockdown periods. This phenomenon was only exacerbated as
restrictions eased across Melbourne and Victoria in the final
quarter of 2020, as seen in the national sales volumes including
Victoria in figure 9 below.
Since the start of 2021, each month of sales has been extremely
elevated on the 5 year average.
In the current environment, there is likely to be a jump in sales
activity as restrictions ease across Sydney. Temporary additional
stamp duty discounts for new homes across NSW expire on the
31st of July, and the current lockdown may make it more difficult
for some people to meet the deadline. However, there are plenty
of places still available for the first home loan deposit scheme
(indeed, tens of thousands of additional places have been made
Fig. 9 Monthly sales relative to previous years, National
2017 2018 2019 2020 2021 5yr average
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
9 © 2021 CoreLogic, Inc. All Rights Reserved.Housing market values did not ‘crash’, but
institutional responses played a key role
Another central theme of CoreLogic reporting through the Across smaller capital cities, dwelling values were virtually
pandemic has been the relative stability of property values. untouched by the pandemic, if not further fuelled by low interest
Nationally, values saw a peak-to-trough decline of just -2.1% rate settings. With a tight labour market and low COVID-19 case
through 2020, before a recovery trend in October 2020. numbers, Canberra did not see a single month of dwelling value
decline amid lockdowns. Canberra has continued to hit a fresh
While the housing market declined -2.1% at the national level,
record high value every month since September 2019.
different dynamics played out across the capital cities.
As the housing market commenced a recovery trend, we noted
Figure 10 shows how dwelling values across the capital cities
several factors could be attributed to the mild downturn and
have changed since March 2020, which marked the onset of stage
swift recovery, including:
2 restrictions nationally.
• Record low mortgage rates;
In Melbourne, where economic conditions were weakened
through extended lockdowns, the peak-to-trough decline in • An engineered economic downturn that had a swift recovery;
dwelling market values was -5.6%. Although the Melbourne
dwelling market as a whole has since recovered this lost value
• Low listings volumes; and, perhaps most importantly;
(and is at new record highs), there are pockets of the market • Enormous levels of government and institutional support.
where rent values remain far lower than pre-pandemic levels,
and values remain more subdued.
Fig. 10 Cumulative change in dwelling values by capital city - March 2020 to June 2021
25%
Darwin, 21.4%
Hobart, 20.8%
20%
ACT, 18.9%
Adelaide, 14.6%
15%
Sydney, 14.0%
Brisbane, 13.0%
10%
Perth, 8.3%
5% Melbourne, 5.3%
0%
-5%
-10%
Oct 20
Nov 20
Apr 20
May 20
Dec 20
Apr 21
Mar 20
Jun 20
Jul 20
Aug 20
Jan 21
Feb 21
Mar 21
May 21
Jun 21
Sep 20
10 © 2021 CoreLogic, Inc. All Rights Reserved.In fact, many of the factors that saw resilience in the housing government has begun rollout on a small business support
market can also be tied back to the government and institutional package. Additionally, some banks are considering “payment
response to the pandemic. The swift economic recovery was breaks” on loans for those who can demonstrate hardship amid
helped by programs like JobKeeper, which made it easier for the Sydney lockdown, though with a more tailored, selective
people to return to work by maintaining employment approach than the broad brush loan repayment deferrals offered
relationships. Mortgage repayment deferrals were likely a key through 2020.
factor in reducing new listings added to the market, which may
Ultimately, there has not been as strong of a government and
have otherwise been fuelled by an inability to make mortgage
institutional response to the current lockdown conditions when
payments. ABS data showed the largest tenure type of
compared to extended lockdowns last year. This may not affect
JobKeeper recipients through September 2020 were home
the majority of homeowners, or potential home buyers, across
owners with a mortgage (50.4%), so it is likely government
NSW over a three week period. Housing markets have already
support payments also supported housing costs.
proved resilient amid circuit breaker lockdowns. The key
The importance of these policies is recognised even in a three- unknown then becomes how long will the current Sydney
week lockdown, with the NSW treasurer writing to his federal lockdown actually last. Housing market conditions could be
counterpart, to request a temporary reinstatement of JobKeeper weaker amid an extended lockdown that does not see the same
payment through the lockdown. This request was denied, though strong institutional response as was seen last year.
commonwealth assistance is reportedly available to individuals
where income has been impacted by lockdowns, and the NSW
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