Housing Demand

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Housing demand is projected to fall over this year and next due to the dramatic impact of COVID-19 on net overseas migration.

This is projected to result in new housing supply temporarily exceeding new demand, according to the National Housing Finance and Investment Corporation’s first major report on Australia’s housing market.

The report does add that any cumulative excess supply could be negligible if effective vaccines are available earlier and international borders re-open sooner than expected.

New housing supply could also be lower than projected if developers face greater difficulties in obtaining the level of pre-sales necessary to obtain project finance for new medium- to-high density developments.

The report follows much longer protracted periods of under-supply in the housing market.

"Notwithstanding a high degree of uncertainty around the path to economic recovery, we have also seen a great degree of resilience in the property sector," said Nathan Dal Bon, the chief executive officer of the government run, National Housing Finance and Investment Corporation.

"Due to historically low interest rates and government stimulus, construction activity and housing prices have held up better than many anticipated," he added.

"This highlights the challenges in the current forecasting environment and this should be considered when interpreting the projections in this report. 

"The current shock is unprecedented in modern times and with this comes a highly unpredictable outlook.

The report noted the impact will also be uneven across different segments of the housing market, particularly for apartments, and for different locations across Australia.
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Housing demand is projected to fall over this year and next due to the dramatic impact of COVID-19 on net overseas migration.

jchancellor

Housing demand projected to fall over 2021

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As commodity prices and mining investment has sunk, demand for housing in mining areas has also slowed. This week we take a look at the performance of some of the major mining towns.
Mining towns and regions across the country have been hard hit as investment and commodity prices have slumped.  This week we’re looking at how the housing market has performed in terms of the volume and median price of sales across these regions.  The results indicate that not all mining towns have recorded an equivalent slowdown.  The following analysis looks at annual median prices and annual sales volumes
Port Hedland – median prices peaked at $925,000 in June 2013 and sales volumes peaked at 402 in July 2006.  Current median prices are $390,000 (-58 percent lower than peak) and current sales are 128 (-68 percent below peak).  In what may be a positive sign for the market, annual sales are once again trending higher, although the median prices trend is yet to bottom out.
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Isaac – median prices peaked at $620,000 in November 2012 and sales volumes peaked at 661 in March 2012.  Current median prices are $138,390 (-78 percent lower than peak) and current sales are 117 (-28 percent below peak).  Transaction numbers have recently started to rise, however median price trends remain negative.
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Karratha – median prices peaked at $815,000 in October 2010 and sales volumes peaked at 511 in March 2005.  Current median prices are $362,980 (-55 percent lower than peak) and current sales are 235 (-54 percent below peak).  Transaction numbers have been trending higher but the median sale price is still falling, albeit at a more moderate pace.
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Gladstone – median prices peaked at $475,000 in September 2012 and sales volumes peaked at 1,823 in July 2007.  Current median prices are $350,000 (-26 percent lower than peak) and current sales are 572 (-69 percent below peak).  Dwelling turnover is continuing along a downwards trend with no sign of an improvement in buyer demand just yet.
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Kalgoorlie-Boulder – median prices peaked at $351,250 in June 2015 and sales volumes peaked at 1,656 in September 2006.  Current median prices are $312,000 (-11 percent lower than peak) and current sales are 345 (-79 percent below peak).  Transaction numbers appear to be levelling, however there is no sign of any upwards pressure on prices or turnover.
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Mackay – median prices peaked at $435,000 in June 2013 and sales volumes peaked at 3,264 in April 2004.  Current median prices are $345,000 (-21 percent lower than peak) and current sales are 1,045 (-68 percent below peak).  Transaction numbers have recently levelled across the Mackay housing market but are yet to improve.
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Roxby Downs – median prices peaked at $500,016 in November 2013 and sales volumes peaked at 187 in February 2004.  Current median prices are $250,000 (-50 percent lower than peak) and current sales are 23 (-88 percent below peak).  Transaction numbers have recently increased slightly across Roxby Downs.
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The smaller mining townships which don’t act as major service centres have tended to see a much sharper fall in median selling prices than the larger townships.  The decline in sales and prices from the market peaks has been substantial across all of these regions, however the regions that have seen the most significant downturn were those that also recorded a significant upswing in prices and turnover rates prior to the peak in commodity prices.
Recently, most of these mining towns have experienced a stabilisation in sales with some regions having seen an increase in sales volumes.  Although sales may have broken the declining trend in a number of areas, median selling prices are generally continuing to trend lower across each of the regions highlighted.
The improvement in transactional activity could potentially be due to larger numbers of distressed sales moving through these markets, but may also be attributable to a cautious return of buyers seeking out a bargain.
The challenge for many of these regions remains that despite a recent uptick in commodity prices, investment in large infrastructure projects (new mines, processing facilities, transport etc) has dried up and subsequently few additional jobs are being created. 
Although commodity prices have recently surged, particular iron ore, coking coal and thermal coal, it is not yet leading to a substantial increase in exploration activity or employment, subsequently housing demand remains weak and continues to have a dampening effect on housing prices. 
Cameron Kusher is research analyst for CoreLogic. You can contact him <a href="https://blog.corelogic.com.au/about/">here</a>.
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The lowdown on the mining town slowdown from Gladstone to Karratha

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The gap between housing demand and supply is narrowing according to figures released by CoreLogic RP Data.
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The CoreLogic RP Data Housing Market and Economic Update for August 2015 has tracked total quarterly dwelling approvals against the quarterly change in population growth.
 
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Gap between housing demand and supply narrowing: CoreLogic RP Data

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The ANZ Australian Housing Update for August said housing demand will begin to slow, most notably for property developers and foreign buyers due to tighter lending standards.
Rate cuts from the RBA in May and August, as well as expectation of more easing is driving pressure on mortgage rates.
The report said for owner-occupiers, the average discounted mortgage rate is now the same as before these macroprudential measures were implemented.
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"We continue to expect that demand for housing will ease from here, driven by tighter lending standards, especially for property developers and foreign buyers," the report said.
 
"A number of major lenders have either exited the foreign investor segment of the market or have made a variety of adjustments, including requiring foreign buyers to hold a larger deposit and reducing the amount of overseas income when calculating the ability to service a loan.
"Construction activity is also expected to moderate. Building approvals remain below last year’s peak, suggesting that the rapid growth in starts and work done is unlikely to be sustained. However, a tremendous backlog of work will continue to support construction around record levels.
"In fact, the large backlog of construction work presents a risk of oversupply emerging in some markets. Significant additions to the supply of apartments are forthcoming in Brisbane and Melbourne, raising fears of settlement risk and eventual price declines."
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Housing Demand

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