Why sellers still have the advantage in the current market

By Gerv Tacadena | 13 Aug 2021

Sellers continue to benefit from the current conditions in Australia as home sales continue to outpace new listings, according to CoreLogic.

The sales-to-new listings ratio hit 1.4 over the three months to July, suggesting strong selling conditions.

This means that for each dwelling added to the market, more than one gets sold.

The ratio has trended over one since June 2020, when HomeBuilder was first announced.

To put that into perspective, the sales-to-new listings ratio averaged 0.9 over the past decade, making the recent figure a significant indicator of a sellers' market.

All capital cities recorded a sales-to-listings ratio higher than one, with Adelaide reporting the highest at two.

Cities that imposed lockdowns in July registered a spike in the ratio, but this could be due to some sellers postponing their listings.

CoreLogic head of residential research Eliza Owen said the sellers' market is being driven by the surge in demand for homes which is influenced by several factors, including low mortgage rates, an increase in savings, and more activity from first home buyers and investors.

Low mortgage rates fuel demand

Data from the Reserve Bank of Australia showed that even with concerns of a possible lift in mortgage rates, home loan rates for owner-occupiers have fallen further over the first half of the year by 12 basis points.

"Mortgage rates are one of the most important determinants of housing demand, and in the current climate, where GDP is once again expected to decline, the RBA will likely facilitate a low rate environment for longer," Ms Owen said.

Boost in savings

Households are also more confident to spend on housing due to the windfall in savings, which was driven by the decline in consumption amid the lockdowns and the financial support from the government.

In fact, household savings peaked at 22% of household income during the second quarter of the year, substantially higher than the decade average of 7%.

"Combined with a range of incentives for home purchases introduced through 2020, increased savings levels may have bolstered borrower deposit levels, triggering additional sales since the onset of COVID-19," Ms Owen said.

Heightened activity from first-home buyers, investors

First-home buyer incentives and other state-based grants have encouraged more first-timers to break into the housing market.

Ms Owen said the participation of first-home buyers in the market provides a clearer understanding of the supply and demand dynamics.

"First home buyer activity creates additional housing demand without adding new advertised stock to the market," she said.

At the start of the year, the number of loans to first-home buyers peaked at 16,260. This was almost double the series average of monthly first home buyer loans secured at 8,731.

While commitments from the segment have started to taper down, they remained 58.8% above the series average through June.

Activity from investors also trended higher since mid-2020. Since then, however, financing commitments from investors has been increasing.

There were 18,625 secured home loans for investor property purchases through June, which is a 74.8% increase on commitments in the same month of 2020.

Tight listings for homes

The lockdowns and restrictions on mobility continuously dampened listings last year.

Over the recent months, however, there were already signs of recovery. CoreLogic data showed that roughly 38,000 new listings were added to the market over the four weeks to 4 July 2021, higher than the five-year average.

However, the recent lockdowns in several parts of the country have wound back this progress. Sydney, for instance, have recorded a 17.3% drop in new listings over the past four weeks.

Ms Owen said the assistance offered to homeowners in the form of mortgage repayment deferrals have helped prevent distressed sales from hitting the market, which is also a factor why listings are low.

"It has also contributed to a persistent seller’s market, which is reflected in the high sales to new listings ratio," she said.

Will the sellers’ market persist?

Sellers should take advantage of the favourable conditions now before it is too late.

The recent CoreLogic Hedonic Home Value Index showed the rate at which property prices are increasing is starting to moderate across capital cities. This could indicate the heat has started coming out of the housing market.

“The ratio may ease in the coming months as advertised supply moves through the normal seasonal spring uplift and buyer demand is limited by extended lockdowns, and affordability constraints,” Ms Owen said.

Top Suburbs : west rockhampton , springwood , homebush , st kilda west , belmont

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