Andrew Bell’s Market Wrap: Some Important Market Statistics

Issue 05 | Thursday 11 March 2021 | Some Important Market Statistics

Hi, Andrew Bell here with you and today I want to give you a snapshot as momentum continues to build across all Australian property markets. As the largest real estate company in Australasia, dominating in listing and selling right throughout the country, the Ray White Group is a great barometer of activity. With $6.1 billion in sales in February, this was a $2 billion or 49 percent increase than in February 2020. It was the best February results ever recorded. Whilst there are many contributing factors to the strength of the market, we hear lots of people reporting that the sharp price increases are because of the lack of stock available for sale. However, this is not actually the case. It is true that the total number of listings on the market across Australia and New Zealand is down 13 percent on last year, and down 32 percent on two years ago, but the total listings are not that relevant as they include all kinds of old stock. A more relevant question is: how many properties came to the market in the past month?

In Australia, in February, Ray White listed 5,977 properties which was nearly 10 percent more than was listed in February 2020 and 15 percent more than 2021. We sold 4,819 properties in the month, and so we are listing more properties than we have for the past two years and listing more than we are selling. There are some early signs in March that listing numbers are continuing to rise. Is this an early sign that the market is starting to self-correct?

There are clear signs that financial regulators are closely monitoring the recent jump in house prices and they are ready to clamp down on property lending if banks take on too much risk. These concerns are off the fact that residential property values rose at the fastest rate in almost 17 years in February. For the month of February alone, there was a 2.1% increase in property values nationwide. Whilst the demand is certainly from home buyers, there was a 9.4 percent increase in loans to investors in January; the biggest gain in more than 4 years. If the financial regulators get concerned, they will actively target credit growth as a way to put the brakes on real estate prices. Remember, back in 2014 the regulators tightened home lending rules for banks for about three years when they were last concerned about rising real estate prices.

Auctions are of course proving to be the preferred method of sale in the market at present and they are a great barometer of the true expression of people’s desire for properties. Fabulous results are being achieved.

I also thought it was time to do that quick snapshot I regularly do about the five fundamental drivers of real estate. Let’s have a quick look.

The first fundamental is the economy – the Gross Domestic Product. Much was reported last week about the V-shape recovery. There is a picture of that on-screen at present showing quarterly growth and where COVID and the massive restrictions resulted in just over a 6 percent decline in GDP, and now of course the substantial bounce back that has been occurring. Most people have been caught by incredible surprise with just how the economy has responded as restrictions are lifted. Forcing people to stay within Australia is one of the major benefits to our economy as well as peoples reactions to spend, spend, spend rather than save, save, save.

The second fundamental is interest rates which have remained at record lows. It has made borrowing money for cars, boats, caravans, and real estate so appealing. The big question is: will they stay low and what happens to borrowers when rates start to increase? Whilst the Reserve Bank stated it was their intention to keep the rates low for at least 3 years, the actual money market is forecasting interest rates to increase by the middle of next year. The money markets are usually right, but time will tell.

The third fundamental is population growth which continues to be low. Not only is national growth down but immigration is of course non-existent, and it is likely we will not see that immigration pick up until 2022 at the earliest. It means the normal annual increase in population that increases demand for all sorts of products, including real estate, is simply not there at present. One year with no population growth might be easily absorbed, but when it starts to run into year two or three, it will have an impact on demand for real estate.

Unemployment is always a big factor and whilst unemployment was forecast this time last year to rise to over 12 percent, no one ever thought of something such as JobKeeper. No question it was the lifesaver of the economy. Remembering, unemployment was hovering around 6 percent pre COVID, so it is amazing that unemployment was at 6.4 percent in January and falling. In fact, national employment was only 59,000 people lower than March 2020. A remarkable performance and one that remains positive for the real estate market.

The last key fundamental for the real estate market is affordability and this is definitely starting to have significant shifts. Whilst lower interest rates help housing affordability, higher prices do not, and so as prices continue to rise affordability will decline and that will start having a braking affect on borrowing. It is also interesting to note that Queenslanders personal debt skyrocketed towards $3 billion over the past year as people turned towards payday loans, by now pay later services such as Afterpay, and short-term loans to get through the worst recession since the Great Depression. These sobering figures show that Queenslanders had an average of $4,038 unpaid on their credit cards at the end of the month of December 2020, had unsecured loans $8,271, plus, on average, $2,754 on the buy now pay later programs. This will start to eat into the ability to continue borrowing and buying.

The other factors I like to keep an eye on is supply and demand which I will touch on in my next report. As I mentioned, a quick snapshot that tells us the markets are constantly moving. What we know is nothing continues exactly the same for all time and as we pass the anniversary of the start of COVID year, it will be interesting to see where we are 12 months from now.

We are proud tomorrow to be hosting our big Business Meets Sport luncheon to raise money for the Surfers Paradise Surf Club. It is wonderful to be able to bring our community together for the first big fundraiser of the year. We absolutely love the Gold Coast and are so proud to play our part in making this a better city to live in for all.

I look forward to being with you in a fortnights. Feeling very blessed to be an Australian and in particular to be a Gold Coaster.

Warm Regards,

Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group

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