CoreLogic’s head of research, Eliza Owen, has released data showing that property transaction activity is holding up well despite hard lockdowns across Sydney and Melbourne:
Initial stage 2 restrictions in 2020 coincided with a drop in sales volumes nationally through April of -33.9%. This included a fall in Sydney sales of -36.7%, and -40.3% across Melbourne. The fall in sales was associated with transactions being harder to carry out amid restrictions, low levels of consumer confidence, and the level of employment falling by about 600,000 jobs through the same month, which may have disrupted intentions to purchase property.
While social distancing restrictions have been reinstated across much of the country, other factors are much more conducive to property sales still taking place. Through 2020, lockdown periods saw the accumulation of household savings (which skyrocketed to 21.6% through the June 2020 quarter, and remains elevated). The cash rate was set to a record low 0.1% in November, and the average cost of debt has continued to decline. Sydney lockdowns have also seen a much milder decline in employment levels, with the number of people employed falling -0.9% across NSW over July 2021, as opposed to -5.9% through April 2020.
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Amid these factors, sales volumes have seen a far milder decline through lockdowns. In the month of July, CoreLogic estimates sales volumes have fallen -3.7% in Sydney. However, the longer lockdowns are extended, the further sales volumes are likely to fall. The fall in newly advertised stock has also been milder through 2021. For the week ending August 29, there were around 1,350 new properties added to the market across Sydney. This is about -23% lower than the five year average prior to COVID-19, but the number has been climbing. Assuming new listing volumes continue to climb, this marks a peak-to-trough decline of -37.5% of new listings added to market since the onset of the Sydney lockdowns, compared to a peak to trough decline of -52.4% through restrictions in early 2020.
This can be seen in Figure 2A, which shows new listings added to the market, with periods of lockdown shaded. Listings have not declined as sharply through current lockdown conditions across Sydney when compared to 2020.
Figure 2B shows that Melbourne has seen a steeper decline in new listings amid the start of the lockdown since August. However, the city has also seen more volatility because lockdowns have been more frequent. On average, weekly new listings across Melbourne (1,765) have actually been higher than in Sydney (1,577), and are higher than the average weekly listings added across Melbourne through the whole of 2020 (1,345).
CoreLogic’s August house price results also showed that property listings had fallen 29.4% below average in August:
At the same time, property sales are running around 30% above average:
Accordingly, any loss in buyer demand caused by lockdowns is being more than offset by a bigger loss of vendor supply.
Basically, collapsing market supply is supporting property prices through lockdowns.