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Boom and Bust 2020 Report

Black Dragon's
Words for the Week

"The world will somehow manage to get rid of the coronavirus, most probably with extraordinary death tolls. But then guess what happens? The world will go back to its routine stupidities, namely the wars, supporting the dictators, voting for stupid politicians, destroying the forests, killing earth's climate etc."

Mehmet Murat Ildan
Author, playwright

Real Estate Realities 

NSW government's $220m residential rent relief package 'not enough' for mum & dad investors

A new $440 million rental relief package announced by the NSW government will not be enough to stop residential tenants and landlords falling through the cracks, industry experts warn.

Tenants who fall into rental arrears after losing their income due to COVID-19 will be protected from eviction, under new measures announced by the Berejiklian government on Monday, which also included financial support for landlords via land tax waivers and rebates.

Real Estate Institute of New South Wales chief executive Tim McKibbin welcomed the announcement of the six-month support package, but warned many mum and dad landlords would not be eligible for financial relief – with land tax only paid by landlords with investment properties above a $734,000 threshold.

“To [the government's] credit they're trying strike a balance here and sharing the burden,” Mr McKibbin said. “[But] the devil is always in the details.

“In less affordable areas … a land tax waiver would be of value, but in more affordable areas [where more assistance may be needed] it's probably not.”

The six-month support package will include an interim 60-day moratorium on evictions and landlords will have to negotiate with struggling households – those that have lost 25% or more of their income due to COVID-19 – prior to seeking a forced end to a tenancy.

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SQM's NEW AUCTION CLEARANCE RATE SERIES
by Louis Christopher, CEO

After months of hard work by the SQM Research team (with special acknowledgement to Max Breedon for his smarts and hard work), I am pleased to now release the SQM Research Auction Clearance Rate Series.
 
For this initial release, we have covered Sydney and Melbourne for each week back to the start of February 2020.  We will provide weekly updates going forward which we hope to release in our regular Tuesday newsletter.
 
Next week we hope to provide you with the back series for the other cities.  Eventually, we will expand out the back-series, provide the full list of auction results, just have we done for the scheduled auction list and then provide auction statistics down to the postcode/suburb level.
 
Overall Methodology
 
The core measurement is based on the total number of properties, number of properties that sold on the day and sold prior, divided into the total number of properties originally scheduled to Auction on that day.  
 
The measurements of Listed for Auction and the Auction Results can be found by monitoring online real estate listings. Auction advertisements contain information on the type of property being auctioned, the date and time scheduled for auction and who the selling agent is.  Each Auction advertisement is also updated for new information such as if there has been a date/time change to the property for auction, if it has been cancelled because it has sold prior or turned back into a private treaty/tender, and of course, if the property has actually sold.  Agents update the ad to also give a sold date.
 
Real Estate Agents will update their advertisement promptly usually within 24 hours of a change/result. Most, if not all update their advertisement within 48 hours of an event. This enables SQM Research to publish a 'Final Auction Clearance rate' which does not need to be revised as every property that was scheduled for auction on the day has been taken into account.
 
Definitions
 
Final Auction Clearance Rate:  (Sold on day of Auction + Sold Prior) ÷ Number of auctions originally scheduled
 
Number Auctions Scheduled: The total number of properties originally listed for auction for the date scheduled. It will include properties that have been rescheduled from this date to another date as well as withdrawn properties. It will also include properties that have been rescheduled to this date. It will not include properties that have sold prior from another scheduled date and will naturally not include private treaty properties. All properties must have an advertised date of auction to be included in our measurements.
 
Withdrawn: The property has been withdrawn from auction. No further information about its sale intentions have been provided at this stage.
 
Rescheduled: The property has been rescheduled for auction at a future date in time. Rescheduled properties are included in the counts for originally scheduled. They will also be included in the count for the rescheduled date.
 
Sold Prior: The property has sold prior to the scheduled auction date. Sold priors are included in the count for clearance rate purposes.
 
Sold on Auction Day: The property has sold on the day of auction under auction conditions and included in the count for clearance rate purposes.
 
Sold After Auction Day:  The property has since sold after the scheduled auction day. Sold after properties are treated as passed in properties and therefore are not included as sold for clearance rate purposes.  
 
Passed in, and/or re-advertised as Private Treaty – The property has been passed in at auction and/or is being re-advertised as a private treaty for sale or tender. If a property has been withdrawn and then advertised as a private treaty/tender for sale, it will be included in this column.
 
 


  
Back series table above notes:
The sold after properties are as at current date and represent all properties that have sold after as a current snapshot. Similar to properties passed in/private treaty, this represents properties that have since been re-advertised as private treaty as at and up to current date. In other words, they are still on the market today (14 April 2020).
 
What do the results reveal?
 
The results reveal that 2020 initially started off with strong market conditions in Sydney and Melbourne through to the end of February.  Auction clearance rates peaked in Melbourne the week ending the 23rd February at 68.5%.  Sydney peaked on the 29th February with an auction clearance rate of 67.5%.  Although it should be noted that this was based on lower volumes, Sydney had a clearance rate of 70.8% on the 8th February.
 
From the beginning of March, auction clearance rates fell each consecutive week and then slumped the week of the Auction ban (25th March).  Since that time, auction clearance rates have been hovering in the low 30s which is possibly the lowest auction clearance rates recorded since records begun by other data providers. It should be noted that many vendors were forced to withdraw from their auction (by law) with the majority opting to re-advertise by private treaty. Only a minority of real estate agents were practically set up for a digital auction.
 
The Easter long weekend just gone by recorded very low auction clearance rates, however it should be note there were only very few auctions scheduled and so the clearance rate reported should be read with caution.
 
Going forward we expect the number of scheduled auctions to significantly fall over the coming weeks, however the auction clearance rate may rise as there will be fewer forced withdrawals as only digital auctions will be scheduled.
 
Questions and Answers
 
Why do you include Sold Priors in your count towards the clearance rate?
Because the sales campaign for the property was successful within the time the vendor wanted the property sold.
 
Sold priors occur for a range of reasons. Often it is because the purchaser has made a bid prior to the auction which the vendor regards as being the right price or better. At times, buyers make bids prior to auction which are above fair market value in order to knock out the competition. Sometimes vendors will accept a bid prior to auction as they think it is likely to be the best offer for the property.   Either way, the property has sold. Whatever you view of sold prior auctions, SQM Research has made it easier for market participants and observers to assess the market by providing the specific count of properties that sold prior to auction.
 
Why do you leave in withdrawn and rescheduled as part of the count of total property scheduled for auction?
Because in our experience, most properties that are withdrawn or rescheduled are due to an expected negative result come auction day. If rescheduled properties sell on the rescheduled day of auction, they will be included in the clearance rate for that day concerned.
 
What if an agent has not updated the advertisement by the time you publish your series?
Through monitoring of the advertisements, we find that most agents (96%+) update the advertisements within 24 to 48 hours after the scheduled auction or when there has been an update prior to the scheduled date. Sometimes we find ads where post the date of auction, there has been no update even after 48 to 72 hours. This sometimes can happen particularly after a long weekend public holiday. The ad still shows the date of auction even while the date has past. We are also aware of some listings sites that automatically take out the date of auction (post scheduled auction date) but still advertise the property as an auction property until the agent updates the ad. If there has been no update to the ad by the time we publish (and yet the listing is still being advertised), we assume the property has passed in and is for sale via private treaty.
 
Where do you source your data from and are there duplicates?
All auction listings are taken from online monitoring of major listings sites. Only those properties advertised with addresses are used and have been advertised as “Auction” are included. Those advertisements with no addresses are excluded from the series. Any addresses repeated between sites are de-duped.
 
What property types are included?
This is an residential property auction series and as such will include residential related properties only. Note some rural/semi-rural properties will be included and some vacant land suited for residential use will also be included.
 
What do the auction clearance rates mean?
Generally speaking, residential property auction clearance rates at 70%+ are regarded as very buoyant market conditions. Such clearance rates normally mean buyer activity is very strong to the point where prices are likely rising at a brisk rate.
 
Auction clearance rates between:-

• 60% to 70% - tend to mean that the market is active with modest to moderate price rises.
• 50% to 60% - are regarded as soft to moderate market conditions. Prices will tend to be flat or record modest price growth.
• 45% to 50% - tend to reveal soft market conditions where prices are falling or flat.
• Under 45% - tend to occur in very weak market conditions where prices are falling.   

 It should be noted that the all-time low (33%) for Sydney/Melbourne auction clearance rates was set in March 2020 – a unique time when the 2020 global Chinese Coronavirus (COVID-19) forced a temporary ban on public auction activity (excluding digital auctions). This created a wave of forced withdrawals.  The all-time high, according to Domain was set for the June Quarter of 2015 when 'preliminary' clearance rates were consistently recorded in the early to mid-80s.  
 
It should also be noted there is a degree of seasonality with auction clearance rates. For Sydney and Melbourne, auction clearance rates tend to be higher between the months of February through to August, compared to September through to December - a time when auction listings seasonally increase which creates a fall in the clearance rate.
 
It should also be noted that a change in the trend in the clearance rate can also be just as important as the absolute number when attempting to working out turning points in the market.  
 
Why measure auction activity?
Because auctions are the timeliest indicator of the housing market.
 
What proportion of the market do housing auctions represent?
A smaller proportion then it appears. Auctions as a percentage of the total market represent no more than 20% of activity in Sydney and about 30% in Melbourne. Nationwide the portion of properties listed via auction is about 13%. In a number of inner urban locations, the percentages are higher. Overtime the proportion of properties going to auction (compared to total listings) has risen.  
 
There are now about three main auction statistic providers out there. Why should I trust your measurement? 

1. Experience. Louis Christopher has now had 20-years' professional experience in the property data and statistics sector. Louis spent over six years (2000-2006) being responsible for the collation of auction results at Australian Property Monitors (APM). 

1. Weaknesses of other measurements. Each week other data providers have an extensive list of auctions that were not reported to them with the effect that their preliminary clearance rate is revised down without fail. And even then, there is still many auctions not reported. We are also aware of many agents who boycott providing results to such data providers. By allowing a little bit of extra time post the weekend, our methodology ensures we are collecting results on nearly all the auctions. 

1. Conflict of interest. SQM Research is purely a research and data business. We do not list properties for sale. We are not a real estate agency group.

VACANCY RATES REMAIN STABLE IN MARCH
by Louis Christopher

New data released by SQM Research today has revealed the national residential rental vacancy rate has remained stable in March 2020 at 2.0% since last month, with the total number of vacancies Australia-wide now at 67,371 vacant residential properties.

Most states recorded minor 0.1% declines in vacancy rates with the exception of Sydney, Melbourne and Darwin which were stable. 

The year on year comparison revealed a minor decline when the national rental vacancy rate in March 2019 was 2.1% compared to 2.0% recorded for March 2020.  Only Melbourne and Hobart recorded higher vacancy rates compared to this time last year.



The minor decline in most capital cities' vacancy rates for March was somewhat surprising given the uncertainty around economy. With job losses, a freeze in migration and an expected sharp rise in short-term accommodation vacancies, we are likely to record significant increases in rental vacancy rates as 2020 progresses. Let's keep in mind our methodology requires a property to be advertised for three weeks or longer before we regard it as unoccupied. 

We note the 3.2% drop in asking rents for houses over the past 30 days which may well be as a result of many short-term accommodation dwellings entering into the longer term leasing market, and overall, a sign of things to come.

Asking Rents

Over the month, Capital city asking rents decreased 3.2% for houses and 2.9% for units for the week ending 12 April 2020 to record asking rents of $544 per week for houses and $428 per week for units. 

Sydney, Melbourne, Brisbane and Hobart all recorded decreases in asking rents for both houses and units over the month.  
 
 
Perth and Adelaide were the only capital cities to record rent increases for both houses and units.  Perth increased by 1.9% for houses and 0.8% for units, whilst Adelaide recorded a 0.3% increase for houses and 1.4% for units.

Canberra and Darwin recorded increases in house asking rents with Canberra increasing by 2.6% and Darwin 0.1%. However, both cities had declines in unit prices over the month.  Canberra declined by 0.1% and Darwin by 0.6%.


 

DISTRESSED PROPERTY OF THE WEEK

4 LYONORS ST, BRACKEN RIDGE, QLD 4017

click to enlarge

Set on a generous approximately 577sqm level block in a family-friendly pocket of Bracken Ridge, a northern suburb in Brisbane, this 4 bedroom, 2 bathroom house has been on sale since March 2020 for $475,000 and is a Mortgagee in Possession sale.  It was last sold in August 2012 for $372,500.
 
The house is a double-storey family home with large open plan living areas, front and rear decks, polished timber floors and new carpet throughout and is ready to move in or rent out.  Upstairs consists of 4 good-size bedrooms plus study and an original bathroom. Downstairs has a second bathroom and plenty of under-house storage space with potential to renovate and value add.

Positioned in a quiet street, the home is only a short walk to schools, TAFE Qld, shops and city bus stop.  The train station, Bracken Ridge Plaza Shopping Complex, Strathpine and Taigum Shopping Centres, Deagon Racecourse, Brisbane Entertainment Centre, the Emily Seebohm Aquatic Centre and Flinders Parade Esplanade, with seaside bike and walking tracks, are all within a short drive.  Brisbane CBD is approx. 30 minutes' drive and the Gold Coast and Sunshine Coast are an approx. 1 hour drive.
 
This is a good sized family home or investment opportunity in a great location.  The home is well-priced for an area that could command asking prices of $500k to $600k.  Current Asking prices for houses in this postcode has increased marginally by 0.5% over the month, after a 7.6% increase over 12 months.  Unit prices however, have declined 0.6% over the month and 1.5% over 12 months.
 
Although this area posted a 5.0% increase in weekly house Asking rents over the last quarter, we now find asking rents in this postcode declining by 4.9% over the last month.  Covid-19 restrictions and job losses seem to have impacted the rental market in this area that was on track for recording some good growth.  The current Gross rental yield potential is still a healthy 4.0% for houses.  Vacancy rates have remained stable at a low 1.0% in February and March 2020.

While the property market keeps changing, keep monitoring this market's growth with SQM Research's free property data. Also consider the SQM Property Explorer product for more in-depth data and property price estimator.




 
Louis Christopher's 2020 Housing Boom & Bust Report has now been released and is available for $59.95!

The Housing Boom and Bust report is accurate, impartial and detailed. Best of all it is priced so that EVERYONE from real estate agents, financial planners to regular mums and dads can access it at just $59.95. 

Key features of the 2020 Boom & Bust report include:

• Louis Christopher's personal take on the markets 
• Capital city forecasts 
• Main drivers of demand and supply at present and going forward 
• All leading indicators such as stock on market, vacancy rates etc
• All the possible scenarios that could play out next year 
• Nearly every city and regional postcode covered re: property stats plus ratings outlook

If you are a real estate professional or a serious residential property investor, you will not want to miss this report!

If you are interested in where the market is heading on a national level, then this is the report for you from one of the most accurate housing market forecaster in the country. 

Click here to purchase now!
 

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SQM RESEARCH HOUSING INDEXES
 

Next update: 21 Apr 2020
 

Next update: 20 Apr 2020