Property market begins to slow

“Data through to mid-April has seen a continuation in this trend, with the combined capital city measure slipping into negative territory week-on-week for the first time since early August last year,” CoreLogic’s head of research Eliza Owen revealed. 

CoreLogic’s tracking has found that the property market is showing signs of slowdown in three main ways.

Agent activity and listings have fallen 

CoreLogic has studied the comparative market analysis (CMA) report that is generated by real estate agents using the RP Professional platform to get information on an individual property. 

“For the week ending the 5th of April, the decline in the volume of CMA reports generated was -19.9 per cent, while the weekly change in new listings volumes recently bottomed out at -26.3 per cent,” Ms Owen said.

Weekly change in volume of CMAs and new listings across Australia, start of 2020

In the 28 days to Easter Sunday 2020, the number of new residential listings advertised for sale across Australia was 24,051. This is by far the lowest level of listings for this time of the year in years, and is 27.3 per cent below the equivalent period last year. 

This is particularly significant, given that this time last year was close to the trough of the previous downturn, and represents listings volumes in a weak market. 

Valuations have slumped, but in some cases this is a good sign

Another early market indicator being tracked is the change in valuations ordered across CoreLogic platforms.

CoreLogic platforms account for the vast majority of valuations ordered on property, including for the purposes of refinancing, purchases, construction and mortgagee in possession events. 

In the week ending 12 April, the total number of valuations ordered was down -24.0 per cent over the week, and 19.2 per cent over the last year. The weekly drop has been compounded by the Easter break. However, valuation activity has been trending lower since mid to-late March. 

Where does this all lead?

In a conversation with Smart Property Investment’s sister title, Mortgage Business, AMP Capital chief economist Shane Oliver explained the ramifications for the property market.

Dr Oliver believes that without the government restrictions, COVID-19 would still lead to a downturn in the property market.

“I thought that people would stop going to auctions anyway,” he said. “I thought that people would put property transactions on the backburner through this period, that’s both sellers and buyers.”

However, Mr Oliver, who last week forecast a 5 per cent drop in dwelling values, has now revised his expectations, with economic indicators “swinging towards a bigger increase in unemployment”, beyond his previous base case of 7.5 per cent.

Mr Oliver said he now expects the unemployment rate to hit at least 10 per cent, which could trigger a 20 per cent decline in property prices.

The AMP economist added that this would be slightly offset by measures introduced by lenders with capital support from the Reserve Bank of Australia, including commitments to defer mortgage repayments for distressed borrowers.

“[These measures may] blunt the impact a little bit, at least for the next six months,” he said.

“I think the risk is that we’ll get out to that 20 per cent [fall in prices], but it could turn out to be a little less because people can have repayment holidays.” 

As a result, Mr Oliver said he is now anticipating a 15 per cent fall in dwelling values, which he noted would “undo” the 9 per cent increase in values seen since mid-2019.