Australian Property Update – February 2022

 

2021 Ended With Auction Records

Australia’s auction market hit extraordinary levels at the end of 2021, with over 40,000 properties going under the hammer in the last quarter of the year.

CoreLogic says 42,918 properties went to auction across the combined capital cities in the December 2021 Quarter – an 85% increase on the previous quarter and more than twice as high as the December 2020 Quarter.

CoreLogic head of research Tim Lawless says the December Quarter was particularly active in the auction market as many capital cities came out of extended lockdowns.

“The large number of auctions held through that quarter also reflects the strong selling conditions that were present, which motivated vendors to capitalise on strong buyer demand and the significant rise in values seen through the pandemic,” he says.

Lawless says in the current market buyers are very competitive so auction is proving to be a successful sales method.

Melbourne and Sydney are Australia’s biggest auction markets, with Melbourne recording 19,788 auctions in the December Quarter with a clearance rate of 70% and Sydney 14,906 auctions also with a clearance rate of 70%.

Brisbane had 3,027 auctions with a clearance rate of 75%, Adelaide 2,902 auctions with a clearance rate of 80% and Canberra 1949 auctions with a clearance rate of 82%.

Building At Historically High Levels

Building activity has hit the highest levels ever, as the after effect of the Federal Government’s HomeBuilder scheme continues to flow through the economy.

Housing Industry Association economist Tom Devitt says official figures may not truly reflect the enormous scale of demand for new builds in Australia at the moment because lockdowns in some states resulted in restricted movements for a few months at the end of 2021.

He says September Quarter figures for building work from the ABS show a 16.5% drop in activity for new detached homes. But, he says, if lockdowns hadn’t delayed work for a few months, the figures would have been much higher.

“The constraint on home building is not demand but the availability of land, labour and materials,” he says.

“The shortage of labour and materials has led to construction timeframes increasing significantly.”

Despite the “lull” there were about 36,000 new house commencements in the September Quarter.

In addition, the number of new home unit commencements were up 12% on the same time the previous year. Tasmania (240%), Western Australia (37%) and Victoria (17%) all had increases in building commencements.

The figures also show a decade highest level of approved-but-not-yet-commenced work. Devitt expects continued strong levels of building into 2023.

Household Savings Reach $260 Billion

Australians have finally started to spend some of those savings they’d been squirrelling away since they went into lockdown and international borders closed.

The Commonwealth Bank’s Household Spending Intentions Index in December was at its highest level since the start of the pandemic, with Australians planning to spend money on transport, travel, retail and household services.

Households have saved an average of 17.2% of their income since the start of the pandemic, according to the national accounts which were released in December. In dollar terms that means about $260 billion has been saved since the start of the pandemic.

By comparison, two years earlier households were saving about 6.1%.

While not all Australians have kept their jobs during the pandemic, the savings have still been extraordinarily high with fewer opportunities for spending.

As state-based lockdowns ended, Australians started to get their wallets out a bit more with ABS figures for November showing retail sales hit a record $33.4 billion – up 5.8% on the same time the previous year.

Unfortunately, the arrival of the Omicron variant has put a dampener on that. The Commonwealth Bank estimates consumer spending dropped about 3% in January.