Buyers react to increased listings

“COVID-19 has brought about downside risks for the economy and housing market,” said Eliza Owen, head of research Australia at CoreLogic.

“A 0.3 per cent decline in March GDP confirmed a technical recession is underway in Australia, total wages paid fell 5.4 per cent between mid-March and early May, and Australian dwelling market values saw the first month-on-month decline since June 2019.

“But one surprising sign of stabilising emerged in May. Home sales have risen, with home owners testing the market, and new listings are rising. In fact, buyer demand is outweighing the volume of new listings.”

The strong absorption of new listings over May can be observed across new and total listings data, Ms Owen noted.

“CoreLogic counts an advertised property as a ‘new’ listing if it has not previously been seen on the market in the past 72 days. Total listings are the sum of new and re-listed stock for sale on the market. The count of new and total listings are typically reported in rolling 28-day periods,” she explained.

“In the 28 days to 31 May, new listings rose 22.4 per cent on the previous period, but total listings fell -2.9 per cent. This means that even as more new stock came onto the market, buyer activity offset the additional stock.”

Looking ahead, Ms Owen said as Australians face record high levels of housing debt, job and income losses could lead to a rise in urgent or distressed sales.

“The latest financial stability review outlined that for each percentage point rise in unemployment, there has typically been an 80 basis point rise in the rate of mortgage arrears. If a large volume of distressed properties are listed simultaneously, this could put downward pressure on property values and make it harder to recoup equity from distressed sales,” she said.

“This is largely why banks have offered ‘repayment holidays’ on mortgage repayments. APRA data suggests 60 per cent of bank loans and advances are in housing, so a decline in property values affects bank profits and capital. Another way to assess the uptake of new listings is to consider the ratio of sales to new listings. This measure is found by dividing sales volumes by the number of new listings and has been used as a leading indicator of property price movements.”