August 2020

This is the 25th in a series of articles summarising monthly news and happenings in Sydney real estate, and more broadly.

Still kicking

This month, Tim Lawless of Core Logic reported on the third consecutive month of minor value falls, with the national average falling 0.6%. Sydney values fell by 0.9%, however regional areas appeared to be more resilient with unchanged values. The effect of COVID-19 on housing values has been “relatively orderly to-date” with Core Logic’s national index falling only 1.6% since a high in April.

“Government support, low interest rates and loan repayment holidays for distressed borrowers have help to insulate the housing market from a more significant downturn”. The number of advertised properties fell by 4.3% over July, sitting 15% below where they were this time last year, however new listing number continued to rise through the month, up 46% from the recent lows of early May, bringing them slightly higher than a years ago. It appears on a number of indices that the market is recovering from a low in May.

In Sydney, dwelling values have dropped about 2.1% since the April high, but are still 12.1% better than 12 months ago. At the moment the average annual growth over the last decade is 4.9%

“In summary, housing markets have weathered the COVID storm much better than we originally anticipated” However, Lawless also makes note that with Government support staging a gradual retreat from October it’s logical to expect a rise in distressed properties coming on to the market, and undoubtedly other factors.

Likewise, Domain reports that the full scale of COVID-19 on the property market is yet to be realised with ANZ, CBA and NAB all predict national house price falls in the vicinity of 10-15%.

Source: Core Logic

Investors to Blame

Domain published an interesting article which discussed research from the University of Sydney, and University College London Institute for Innovation and Public Purpose, that showed that over 29 per annum quarters leading up to June 2019, there was more dollar value in owning a median-value home than having a median-paid job.

In regards to Sydney and Melbourne being two of the most expensive cities in the world to buy property, investors, apparently, are a large chunk of the problem. The research states that:

“The investor share of new mortgage lending has grown from 10 per cent in the early 1990s to 40 per cent. It has given owner occupiers and first-home buyers price competition they didn’t previously have to face.

“Australia’s unusually generous tax concessions for investors helped. They are granted discounts on capital gains tax, while being able to deduct the full costs of operating their properties, (including interest costs) against income from any source.

“Where the deductions exceed rental income, the process is known as negative gearing.

“A lot will need to change in order to shift things. Mortgage credit will need stronger regulation. It may be time to revisit the credit controls used in Australia in the 1950s and 1960s, which directed investment into new rather than existing housing and helped increase home ownership.”

Handy renovation calculator

 Suncorp have partnered with Core Logic to produce a renovation calculator. As Core Logic says:

 “The calculator has been launched in parallel with Channel 9’s The Block which kicked off on television screens across Australia on Sunday, 23 August.

 “Renovators can use the calculator to quickly determine the estimated costs of various home renovations in any particular suburb, with an extensive range of renovation types. “

The calculator can be found here. If you are reticent to provide your address lest you get added to a marketing database, you can always add a disliked neighbours’ address instead ;-).