Major supply shortage is pushing up property prices

CoreLogic has released its Housing Market Update Report for February, which provides a bunch of key data pertaining to Australia’s property market.

What sticks out most in this month’s report is the lack of homes listed for sale, which is tracking around 28% below the five year average:

As shown above, there were only 131,657 home available for sale across Australia in February 2021, way down on an average of around 200,000 homes for sale during the same month between 2016 and 2020.

At the same time as stock levels have cratered, actual demand as measured by sales is tracking around 10% higher than January 2020 and well above the five-year average in trend terms:

This surge in demand is also reflected in new mortgage growth, which has soared to unprecedented levels:

Clearly, strong buyer demand coupled with the dearth of available supply is behind the rapid property price growth being experienced across Australia.

Unconventional Economist
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Comments

  1. I read an anecdote somewhere that REA are throttling supply. Wonder if there’s any truth to this?

      • Here in south Sydney there are quite a few “sold off market” signs going up, is this a sign the agents are holding stock off market or that it’s places being snapped up before listing?

        • Property being bought before listing is not unusual. Most real estate agents have a pool of actively interested buyers that are shown houses as soon as they become available, often before the photographer has been through to enable the listing.
          My ppor was bought pre listing in 2010 so it’s not anything new.

        • our neighbours sold off market – were happy with the offer and decided to take it before going to a campaign, although having seen what the neighbours just up the road got (paddington where a 3 bed terrace that needs work hits $4m!!!) I think they might be reconsidering whether taking $3.4m was a good idea (although still probably overs what I’d consider reasonable).

      • Not my theory just something I saw maybe on the comments here and wondered whether it might be a reason for low stock on market?

        In my town there seems to be a steady increase in supply but they are asking peak prices some and sitting on the market. Sellers refusing to drop their price so they are sitting on market. Anything that is reasonable price is snapped up fast. It’s interesting to watch play out but I feel like it’s about to go nuts and people will pay silly prices.

    • blacktwin997MEMBER

      These are probably savvy hodlers we’re seeing here. They possess knowledge that we can’t begin to understand.

  2. Would be interesting to know:

    * Amount of Owner Occupier new mortgages on existing property (i.e. borrowing additional funds to add a study)
    * For those purchasing a new home, whether they are upsizing or downsizing

    I hazard a guess that the two groups I mentioned above are mostly after the same things in property – dedicated home office space combined with a more desirable home environment. I’d imagine that supply side issues are most prominent along homes which meet those criteria (not so much dog box apartments).

  3. Arthur Schopenhauer

    Building the wrong stuff (crappy 2 bedroom, 3 story and more, hi-density apartments), in the wrong areas, for people who don’t live in the country. Who coulda node.

  4. Display NameMEMBER

    mmm find it hard to believe.
    No migration for > 12 months. Building going flat out for years. Census suggesting people per household pretty consistent. Sounds more like FOMO again. Stoking the RBA conflagration. Be interested to see the average Sydney mortgage for the last 6 months. Never going to get repaid.

    • Jumping jack flash

      Wage theft held back the pent up demand by making them not eligible for the amounts of debt that were required. In many cases wages were actually adequate due to the low price of debt, but that buy-in was a doozy to try and save up.

      As house prices increase, 5% of the price for the ponzi buy-in fee gets more and more difficult to save. Up to 40K of super will leverage into a fair wad of debt at 95% LVR.

      Early release of super plus other COVID stimulus allowed many to finally acquire the ponzi buy-in (deposit) they needed to become eligible for the required amounts of debt. (with a 6-month lag)

      Actual living costs are of course gouged for all they can be for exactly the same reason – to enable the lucky few who can steal wages in these sectors of the economy to become eligible for the debt they need. This of course never makes it into CPI because it is fundamentally broken, and this failure is exacerbated by wage theft.

      And what we are seeing now is the result. It is quite simple to understand.

      And if a relatively small amount of a few tens of billions of leveraged COVID stimulus can achieve all this, then what do you think will happen when a few trillion of COVID stimulus appears and starts getting leveraged?

  5. “Supply shortage” implies a shortage for shelter which, after immigration cuts from covid, would be unbelievable. There’s a supply shortage for speculators thanks to low rates and lending standards. What a scenario for undetected RBA officials to have the power to create without recourse.

  6. Demand is up partly because rates are the lowest they’ve ever been, access to mega big loans is easier now that banks no longer have to comply with stricter lending conditions (post the Hain Royal Commission recommendations being trashed by the Feds), government new home builder stimulus bribes and no one, investor or owner-occupier wants to buy a high rise apartment (quality, safety and lack of foreign buyers). Most people are realizing that investing in detached housing is the best financial game in town. Probably the only game in town. Certainly better than leaving your money in a term deposit.

  7. Holiday In ScomodiaMEMBER

    Anecdata- Appears any decent family detached homes under ~$750 (FHB bracket, young family upsizers etc- at least in my neighbourhood) flying here in the Illawarra- and some cheaper rundown rental dumps are also moving- smarter boomer investors may be cashing out….? Doesnt look to be many places for sale tho, stock shortage appears case here too…

  8. Major supply shortage is pushing up property prices

    I told you all this 20 years ago. Nothing has changed.

    Australia has a structural shortage of decent housing caused by the number of extra people consistently exceeding the number of extra decent dwellings created.

    The solution is to:

    1) tackle all of the issues that cause too many people to go to any given area. This covers immigration, our idiot one-giant-city-per-state model and our rent-seeker-haven CBD’s and office commute obsession, etc.

    2) tackle all the issues that choke the creation of many extra decent dwellings. These include zoning, investor incentives, transport, infrastructure funding, etc

    Of course there are also underlying problems and solutions behind all of this. Being able to elect a government that actually gives a damn about citizens would help.

    • The solution is don’t get the covid vaccine unless quarantine is lifted. If there aren’t enough people vaccinated they can’t open the borders.

  9. Yeah na, can’t be. Was a poster on here just a few weeks back when I suggested this exact argument, that demand for quality detached housing was red hot, especially in the areas & price ranges sustained by those in industries with limited (if not positive) COVID household budget impacts and that there was very little of it to choose from.

    Complete crap apparently, “record amount of stock on market” , “will all come crashing down in March”.

  10. Ailart SuaMEMBER

    To keep the fall in Australian living standards at a level that prevents street riots, governments have to keep property values constantly rising at ridiculous levels. They’ve blown their bolt on interest rate cuts, they can’t do anything about wage stagnation – the exact opposite actually – and since the late 1990’s, they’ve been on a mission of ‘fiddling’ with the CPI basket of goods. In other words, making inflation appear better than it really is. The ‘classic’ occurred in 1998, when the cost of land was quietly removed from the ‘dodgy’ basket. But all that innovation numbing shyte is just lazy, useless government, copy-catting from other countries also cursed by modern neoliberalism and democracy hijacking elite donors.

    Unless young folk can do something about Constitutional and electoral-system change, life for the majority will continue heading south. You can bet the house on it.

  11. Jumping jack flash

    Massive amount of pent-up demand, “locked out” due to ponzi buy-in requirements being a percentage of price. Prices rise, buy-in becomes harder to achieve. COVID stimulus plus the banks’ not caring where money comes from before 6 months ago gave many the opportunity to break in, and look at it go!

    The real question is has this kicked off perpetual debt so the boom can run to infinity?

    I guess we will see soon. After, say, March anyone who was going to spend their COVID stimulus on acquiring debt will probably have done so.

  12. I see lots of people confusing structural supply (number of dwellings) versus inventory (number of dwellings on market).

    The latter is temporary, and anecdotally due to:
    1) People seeing prices rise, media propaganda of houses to the moon, so why would I want to sell
    2) Older people afraid to downsize or go into retirement living until Covid scare is over
    3) Catch 22 of no places on the market, so where would I go if I sell

    Real estate agents must be doing it tough.

    On the flip side, the demand equation is obviously driven by lowest ever interest rates and:
    1) Banks restarting irresponsible and incredibly huge loans (7+ x HI, with falsified records) even before Frydenberg has fired the starter gun.
    2) Expats moving back from HK buying site unseen
    3) Mega FOMO pumped by the media
    4) Recognition that APRA, RBA and Liberals are completely corrupted by vested interests. They will bring forward every cent of future income, into eternity, to pump today’s property market.

    Result is Joye’s predicted 30% price increase has actually happened in under 6 months in middle-class, middle to outer ring, detached houses.

    This could be just a temporary pules of insanity, until inventory levels increase.

    Frydenberg is hoping irresponsible lending will propel Wile E Coyote to an even higher cliff ledge. Perhaps Australians can do it, we are dumb enough.

    • FUDINTHENUDMEMBER

      Don’t forget all the handouts/grants plus super withdrawls. Massive transfer of Govt money to private savings.Lots of demand been brought forward. Boom times ahead! (for now)

    • Jumping jack flash

      “Frydenberg is hoping irresponsible lending will propel Wile E Coyote to an even higher cliff ledge. Perhaps Australians can do it, we are dumb enough.”

      If we get it right it will be a treadmill on skyhooks:
      Enormous amounts of debt attached to houses, lowering LVR as house prices rise, supporting price inflation, feeding back into wage inflation, allowing larger amounts of debt to be obtained and attached to houses. And around it goes forever, in that cycle.