6 Ways COVID-19 Turned The Property Market Upside Down
COVID-19 has turned Sydney’s eastern suburbs property market around but not necessarily in the ways you might think.
We look at six patterns we’re seeing in local real estate as a result of the coronavirus.
1. Price growth paused but didn’t plummet
As we reported, the eastern suburbs property market began 2020 strongly, with prices across the city lifting almost five per cent in the first three months of the year. This came on the back of a rise of almost 10% over the second half of 2019 – bringing them almost back in line with where they were at their 2017 peak.
The first effect COVID-19 had on the market was to stop that growth. In April the median Sydney dwelling price rose just 0.42%, before falling back 0.4% over May.
This was different to previous economic disruptions, such as the Global Financial Crisis when property prices dropped 3.5% over the second half of 2008 before lifting in early 2009.
2. Supply dried up even further
One of the main reasons for stable prices, even in the face of economic uncertainty, was that supply dried up over April and May 2020. In fact, CoreLogic reported that listings levels across Australia in late April and early May were lower than had ever been recorded. This helped cushion prices as the buyers left in the market had fewer properties to choose from.
While stock levels began increasing over June, we also saw this increase in supply absorbed by increasing demand from buyers entering the market again. So the supply and demand curves have more closely correlated than you might expect from a recession.
3. Low interest rates got first home buyers back
Interest rates were already at historic lows before COVID-19 struck. Then the RBA slashed them even further. The official cash rate now stands at just 0.25% and the RBA has said it intends to keep it there for as long as it takes to get the economy going.
This, along with generous government schemes, has given many first home buyers the confidence they need to enter the market for the first time. And why wouldn’t they? With a 20% deposit, low interest rates make it now cheaper to buy in many suburbs than to rent. The problem, of course, remains trying to save that deposit…
4. The market has split in a different way
More determined buyers vying for entry-level properties means we’re seeing strong sales in this part of the market. Anything with price expectations of up to $1.5 million is selling well.
Further up the chain, we’re seeing less activity, although there have still been some very strong sales, even at the premium end of the eastern suburbs property market. For instance, we’ve noticed real competition in the Paddington and Woollahra markets for homes over $6 million.
5. The property selling seasons changed
When supply dried up over March and April, it coincided with the traditional Autumn selling season. This made the market quieter than I ever remember. Instead of heaving Saturday open homes and hotly-contested auctions, we were restricted to showing properties by appointment and to just one person at a time. That didn’t necessarily mean that buyers and sellers weren’t there. They just didn’t have as much opportunity to act.
In June, property started coming onto the market once more and I expect this trend to continue over Winter, as people see that there are interested buyers around. With few people holidaying away from Sydney and social distancing restrictions being relaxed, we believe that we may start to see a busy Spring-like market at the coldest time of the year.
6. This is a good time to step up
It isn’t just first homeowners and investors who benefit from a market like the current one. I think these market conditions – characterised by low interest rates, an active entry-level and likely increased stock about to hit the market – make this an excellent time to step up the property ladder. As long as you have stable employment, it is cheaper to finance a property than it has ever been.
The main question is whether to buy first or sell first, which you can read more about here. https://www.bencollierteam.com.au/market-insight/18/08/changing-properties-buy-sell/
If you’d like to know more about buying or selling in Sydney’s east, please get in touch.