The trend that is sweeping Australian real estate, the one we call The Exodus To Affordable Lifestyle, started in Regional Victoria.
It has been, and continues to be, a strong trend elsewhere in Australia – but it first became apparent in Victoria. And it continues to be a powerful force there.

This significant demographic shift has been incorrectly reported in mainstream media as being a consequence of the pandemic lockdown period. In reality, The Exodus To Affordable Lifestyle started well before 2020.

It has been driven primarily by technology – which has created the ability for more and more people to work remotely – and has been enhanced in some instances by improved transport links.

Affordability Best Since 2009: Moody’s

Housing affordability is at its best level since 2009 because of low interest rates and falling house prices in the biggest cities, says Moody’s Investors Service. “Housing affordability improved in Sydney, Melbourne, Brisbane, Perth and Adelaide over the year to September,” says Moody’s vice president Alena Chen.
House prices fell, on average, 1.5% over the five months to September, though prices are still up 3.2% over the year – and most the price decline has occurred in the two biggest cities.
On average, Australian households need 23% of their monthly income to meet mortgage repayments, compared with 25% a year ago and 26% on average over the last 10 years. Sydney remains the least affordable, with new borrowers needing 30% of household income to meet repayments, compared with 25% in Melbourne. But borrowers in Adelaide and Brisbane need only 19% of their household income for their mortgages while Perth is the most affordable city, needing to just 15%. 


We Believe Recession Is Over: RBA

Reserve Bank deputy governor Guy Debelle says the RBA now believes the country’s first recession in three decades ended in the September Quarter. “As best as we can tell, the growth elsewhere in the country was more than the drag from Victoria,” he says. Ahead of a highly-anticipated RBA board meeting next Tuesday – when the cash rate is likely to be reduced by a further 0.15 percentage points to 0.1% – Debelle told Senate estimates that “our best guess is it looks like the September Quarter recorded positive growth rather than slightly negative”.
“And as best as we can tell, the growth elsewhere in the country was more than the drag from Victoria, and possibly the drag from Victoria was a little less than what we guessed back in August,” he says.
The RBA will release a new set of forecasts in its quarterly Statement on Monetary Policy (SOMP) next Friday.
The bank’s August SOMP said “the effects of the heightened activity restrictions in Victoria are likely to offset the pick-up in GDP growth in other parts of the economy in the September Quarter”.


Auctions Outcomes Continue To Improve

Auction volumes increased from 13,783 to 14,216 (up 3%) in the September Quarter, according to CoreLogic.

“The combined capital city auction clearance rate increased over the three months to September, returning a clearance rate of 59%, up from 48% over the June Quarter, which was the lowest seen since the December 2018 Quarter (44%).

In the past week, Sydney had 707 properties go under the hammer, accounting for 60% of all auctions, but Melbourne had its biggest weekend of auctions in two months with 188 homes going to auction – up on 59 in the prior week.

Among the smaller auction markets, Canberra was the strongest, recording an 86% clearance rate with 49 of 59 auction results collected.

Brisbane recorded a preliminary clearance rate of 55% with 74 auctions scheduled; Adelaide recorded 71% from a similar number of auctions; and Perth managed 55% from just 26 auctions.

Nationally, CoreLogic reported a 72% preliminary clearance rate from 1,134 auctions, up from 72% a week prior.

Onsite auctions return to Melbourne this week.


Economy Will Recover Quickly: Deloitte

Australia’s economy is forecast to rebound quickly, growing by 3.4% on average over the next five financial years, according to the latest Business Outlook from Deloitte Access Economics.

Deloitte partner Chris Richardson says: “If things go right, and virus numbers go right, you genuinely start to get a beautiful recovery”.

Richardson says previous recessions or downturns in Australia had been followed by times of faster growth as workers and ­industries resumed ­activity.

“The point that people have not understood is we will grow really fast when we come out of this,” he says. And “the bigger the downturn, the bigger the ­recovery”.

Deloitte forecasts that after contracting by 2.5% in this financial year, real GDP growth will grow by 4.4% in 2021-22, and 4.1% in 2022-23, before tailing off to 2.8% by the middle of the ­decade.

Richardson expects the recovery to be supported by low interest rates which he says will be “flat to the floor” until mid-2024.


Investors Turn Focus To Smaller Cities

Smaller cities can expect an increase in demand from investors as the big cities lose their appeal in the wake of Covid-19, according to new research from CoreLogic. 

CoreLogic head of research Eliza Owen says Covid-19 triggered a retreat of investors from favoured markets like inner city Sydney and Melbourne.

From an affordability and yield perspective, smaller capital city markets could grow in popularity with investors in the coming months, while the larger cities are unlikely to regain ground “until overseas migration and travel resumes”, she says.

At present, Brisbane, Perth and Adelaide offer much higher yields than the southern capitals because of lower dwelling values.

The latest ABS housing finance data shows current investor participation is 24%, well below the decade average of 36%.

Investor activity has been reduced because investor loans attract a higher interest rate, there is less appetite by lenders for high LVR and interest-only lending, the reduction of rental returns in the big cities, and the shocks caused by the pandemic.


Confidence In Housing Market Booms: Westpac

Confidence in the Australian housing market is rising, with a Westpac consumer survey revealing a strong uplift in consumer sentiment.

The national “house price expectations” index grew by 32% to 117, with all states registering a double digit increase.

The national “time to buy a dwelling” index increased 11% in the past month to 122, rising to its highest level since September 2019.

Westpac chief economist Bill Evans says it as an extraordinary result, stating the overall consumer sentiment index was up 32% in the past two months, and 10% above the average level in the six months prior to the pandemic.

“Such a development must be attributable to the response to the Federal Budget; ongoing success across the nation in containing the Covid-19 outbreak; and the expectation that the Reserve Bank board is likely to further cut interest rates at its next meeting on November 3.”

There was also a “stunning lift” in confidence around job security, says Evans, with the index improving by 14 to early 2019 levels. 


Extra Payments To Mortgages Increase

Voluntary payments into mortgages doubled in July, August and September from the previous 12 months, as home loan borrowers paid extra to build a buffer.

Data from non-bank lender Firstmac shows the level of additional payments made by borrowers rose to an average 10% of the portfolio in the past three months, compared with the monthly average payment of 5% last year.

“There’s obviously a lot of money flowing through the economy and people are choosing to save that money,” says Firstmac chief financial officer James Austin. “Paying down the mortgage is another form of saving.”

In the June quarter, the nation’s household savings ratio jumped to 20%, the highest level since 1974. The figures indicate a relatively low level of arrears among mortgage holders seeking payment relief, which is consistent with data from the Commonwealth Bank.

According to the CBA, 22,900 (57%) of the 40,200 customers who deferred their loan repayments are now ready to start making them again.


HomeBuilder Keeps Tradies Employed

An increase in the number of loans for the construction of a new dwellings shows HomeBuilder is helping to stimulate the construction industry and is keeping tradespeople in jobs.

In August 2020 the number of loans for the construction of a new dwelling increased 23% compared to July and were up 34% in annual terms, according to the ABS.

The HomeBuilder scheme has seen first-home buyers entering the property market in droves, with FHB loans rising 17.7% in August. In the last year, FHB loans have increased 37%, the highest level of first-home buyer loans since October 2009.

This means benefits of the stimulus package are filtering through to the broader economy. According to the Housing Industry Association, sales of new homes rose 61% in the three months to August 2020, compared to the previous quarter since HomeBuilder was announced.

The positive response to HomeBuilder means there is a continued pipeline of construction to keep tradies and builders employed.


Home Listings And Confidence Rise

New home listings rose in September, heralding an increase in property market confidence as the Spring selling season gets under way. Listings of homes for sale rose across the country, with the exception of Melbourne.

Sydney’s stock on market rose 1.8% compared to August and Perth recorded a 0.9% increase, shows data from SQM Research. Nationally, the number of properties that had been on the market long term, i.e. 90-180 days, fell 8.6%, indicating increased sales activity.

“When we see an increase in new stock and a decline in old stock, that normally spells increases in activity in the market,” says SQM managing director Louis Christopher. “Old stock’s getting absorbed and new vendors are coming to the market.”

Christopher says the residential market is an increasingly attractive investment. “When we consider rental yields, the truth is most cities are offering cashflow positive properties compared with where lending rates are,” he says. “I’ve never seen that


Housing Triumphs Over Covid-19

Home lending rose 12.6% in August, the highest monthly figure since January 2018. The latest data from the ABS shows that annual growth in home loans was 19.3%, confirming that the housing market has held up strongly against the pandemic impacts.

The largest increases in new mortgage commitments for owner-occupiers were in Victoria, Queensland and New South Wales.

“The evidence continues to mount that Australia’s housing market is going to come through the Covid‑19 pandemic largely unscathed,” says the latest CBA Economics report. research director Sally Tindall says the value of new loans was actually higher in August than it was in March.

“Owner-occupiers led the way with the value of new loans increasing 13.6% from the previous month and 29.2% year-on-year,” she says.

First-home buyers were at their highest level in over a decade as well, with a total of 12,302 FHBs settling loans in August, the biggest monthly number since October 2009.

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