COVID-19 lockdowns have severely hampered market activity across much of the nation this year, seeing many vendors postpone sales campaigns until buyers can attend auctions and open for inspections in person.

This has seen a significant reduction in the supply available to eager buyers, who have been forced to compete for the reduced purchasing opportunities, via online auctions or private sales.

Across the nation, total stock advertised was down 27.1 per cent on the five year average in the four weeks leading up to August 8, according to CoreLogic. 

Sydney, suffering under its protracted lockdown, has seen new listings fall more than 17 per cent over the four weeks leading up to mid August.

Once lockdowns eventually ease however, we can expect a surge in market activity, as vendors take the opportunity to hold in person auctions and open for inspections again.

This pattern was seen following Melbourne’s protracted lockdown in 2020 and subsequent lockdowns this year, which flowed on to drive uncharacteristically high auction numbers across Summer, and the busiest Autumn auction sales period on record.

However, despite the increased levels in supply, it’s likely to remain a sellers’ market across much of Australia.

So how should buyers navigate the purchasing process, amid surging demand and limited supply?

First off, they shouldn’t be disheartened. A buying campaign is usually a marathon, and prospective buyers accrue valuable knowledge of the market and their requirements along the way. 

Patience is a vital quality. The temptation in this market is to compromise and buy something that isn’t quite right. 

That only leads to buyer’s remorse down the track. Buyers need to trust that more supply will arrive in the future and remain discerning in the interim.

Saying that, if the right property presents itself today, a buyer should still know how to pounce. 

That’s especially important amid the sporadic and uncertain nature of lockdowns. 

Buyers who have carried out sufficient reconnaissance and due diligence between lockdowns, will be well poised to jump on unexpected opportunities that arise due to the disruption.

The challenge then becomes about paying a fair price. Typically, finding recent comparable sales are the key to establishing fair value. 

Some investors are initially determined only to buy in a specific suburb or two, which makes them vulnerable when choice is low. Becoming enlightened about new ‘comparable’ suburbs reduces the risk of overpaying.

There are a couple of other factors to bear in mind, given the likely elongation of the buying process. 

First, buyers should be mindful of the expiry date on their mortgage pre-approval. A three-month limit is not unusual, which is easily exceeded in today’s conditions. 

Second, those who are looking to move home and trade properties in the usual order – sell first and buy second – may want to avoid short settlement periods to reduce the heightened risk of failing to find a replacement property and being forced to take up a short-term rental lease.

In these unstable times, it’s vital property investors are informed, prepared and agile – to ensure they lock in stable, long term returns.

Perth’s property market continues its ascent, with sales volumes and property prices sharing in the national attraction to low interest rates, high savings levels and relatively low numbers of COVID cases.

Among the top ten suburbs for price growth, median property prices rose by 25 to 45 per cent in a range of prestige and working class suburbs.

Salter Point recorded the biggest growth to its median house sale price in the last financial year, increasing 44.7 per cent to $1.352 million. This was followed by Ascot (up 42.1 per cent to $810,000), Bicton (up 30.9 per cent to $1.14 million), Claremont (up 30.8 per cent to $1.7 million) and Medina (up 30 per cent to $260,000). 

REIWA President Damian Collins said the top 10 list represented a diverse mix of suburbs, with median house sale prices ranging from as low as $255,000 to as high as $1.7 million. 

“It is reassuring to see that since we hit the bottom of the market in July 2020, the Perth property market recovery has been widespread,” Mr Collins said.

“This is reflected in this top 10 list, with positive median sale price growth seen in suburbs from all different price spectrums of the market. 

“In addition, it is also encouraging to see how dispersed these top 10 suburbs are across Perth, ranging from as far south as Wannanup, as far north as Sorrento, over to Ascot in the east and Claremont in Perth’s affluent western suburbs,” he said.

House prices in Perth are still 12.5 per cent below the last peak in June 2014 however rents, a generally reliable indicator of future price growth in this market, are now only two per cent below the May 2013 peak.

Chief Economist at Ray White Real Estate, Nerida Conisbee, said there is “still a while to run for this red hot market.”

“Unusually, the Perth market is strong at a time all other Australian markets are also strong,” Ms Conisbee said. 

“It’s being turbocharged by particularly strong iron ore export growth, with iron ore sales surging by 20 per cent in May

Ms Conisbee said the suburbs doing well in Perth are a mix, ranging from affordable Medina within the industrial centre of Kwinana, to City Beach which has just hit a $2 million median. 

“At a more aggregated level, it’s the Local Government Area (LGA) of Cottesloe, one of Perth’s most coveted addresses, that is seeing the strongest growth but all price points across the city are doing well, however, there is a slight tilt to some of Perth’s most expensive suburbs,” she said.

Turning up the volume

In line with the rise in demand that is driving up prices, so too are sales volumes climbing vertiginously as first home buyers seek solace from rapidly escalating rents and the near non-availability of rentals in many suburbs. 

Ridgewood, Madora Bay and Two Rocks are amongst the 10 Perth suburbs that have seen the biggest percentage increase in sales activity during the 2020-21 financial year.

REIWA’s Mr Collins said of the 10 suburbs to make the list, six had more than doubled their sales tally in the 2020-21 financial year compared to the previous 12-month period.

“The Perth residential sales market has experienced a rapid turnaround in the last 12 months, with sales activity across Greater Perth up 29 per cent overall, and some suburbs have far exceeded that overall figure during that same time frame,” Mr Collins said. 

REIWA data shows sales volumes in Ridgewood, in Perth’s outer north, had increased by 122 per cent in the 12 months to June 2021, while in coastal lifestyle suburbs at the southern and northern extremities of the city, Madora Bay and Two Rocks, sales were up by 121 per cent and 115 per cent respectively.  

“Of the 10 suburbs to make the list, seven had median house prices below the overall Perth median, while only one, Trigg, had a median house price above $1 million dollars,” Mr Collins said. 

“First home buyers are very active in Western Australia, which is why the biggest surge in movement is being felt at the more affordable end of the market.

“There is good news for sellers too, with every single suburb on this list having recorded median house sale price growth over the last 12 months.

“The dominance of the more affordable suburbs on this list suggests there is particularly strong appetite from WA first home buyers who recognise that now is a great time to take advantage of Perth’s affordable housing before prices inevitably rise further as the market continues its recovery.”

Regional rampage

Beyond the state capital, the impact of the mining boom becomes more apparent. 

Port Hedland tops the list (at an LGA level) when it comes to price growth, increasing by 45 per cent over the past 12 months. 

Although very strong growth, prices are still down 40 per cent from where they were five years ago, showing the choppy nature of mining town prices. 

Ray White’s Ms Conisbee said the other clear trend is the demand for beachside and treechange regional locations. 

“Like the rest of Australia, changes to the way people work and demand for second homes has been a driver of demand in regional towns.”

Ray White’s newly released half-yearly State of the States review found a staggering nine of the top ten growth areas by LGA (as opposed to suburb) were in regional areas. 

After the Pilbara, four of the top five were in the state’s southwest, namely Northam (growth of 38.1 per cent on a median price of $300,000, followed by Waroona (32.4 per cent/$335,000), Denmark (26.8 per cent/$520,000) and Collie (25.8 per cent/$195,000).

The latest research from Perth Cityscope shows property sale numbers and figures have decreased. The last three months to the beginning of June 2021 recorded 20 sales for a total of over $85.4 million; with $76.8 million for commercial, $3.8 million for commercial strata, $1.2 million for retail, $2.1 million for retail strata and $1.4 million for other.

In comparison, the three months to the beginning of March 2021 recorded 30 sales for a total of over $112.6 million; with $84.2 million for commercial, $12.6 million for commercial strata, $5.9 million for retail, $8 million for retail strata and $1.9 million for other.

The 12 months leading up to the end of June 2021 recorded 82 sales for a total of over $240.9 million, over $228.2 million lower than the recorded figure for the same time period the year before.

The table below shows sales recorded for the past eight updates of Perth Cityscope:

The most significant sales recorded this quarter together totalled over $74.8 million.

Stamford Green, comprising a 14-storey office building and three, two-storey heritage buildings, has been sold for $67.8 million to Redhill Partners Investments Pty Ltd. The sale of the property, formerly known as Dynons Plaza, was negotiated by John Williams of JLL Perth.

28 Kings Park Road in West Perth was bought for $5 million by Mandeland Pty Ltd, through Nick Charlton and Tony Delich of Knight Frank Perth. The 1,331 sqm office building comprises three levels of office space above ground floor car parking for 38 vehicles. It last traded in 1994 for $1.912 million.

Also in West Perth, 1187 Hay Street has been purchased for $2.075 million by 1187Hay Pty Ltd. The 301 sqm, two-storey office building includes car parking on site for 7 vehicles and last traded for $470,000 in 1991. The latest sale was negotiated by Sean Flynn and Nigel Freshwater of JLL Perth.

Some current properties listed for sale include:

• 16 Emerald Terrace, West Perth – a 212 sqm, single-storey house converted to commercial use. The property includes car parking for 8 vehicles. For sale with an asking price of $2.45 million; agent, Charter Property (Clyde Badger).
• 20 CoLin Street, West Perth – a 267 sqm, single-storey office building with on site car parking for 10 vehicles. For sale by offers to purchase, closing June 25, 2021; agent, Acton – Dalkeith (Scott Ellwood).
• 853 Wellington Street, West Perth – a 661 sqm, two-storey showroom and office building. For sale with offers around $1,700,000 being considered; agent, Knight Frank Perth (James Baker and Tony Delich).

Properties under contract (conditionally or unconditionally) include:

• 38 Richardson Street, West Perth – a four-storey, 1,207 sqm office building with ground floor car parking for 33 vehicles. Under contract; agent, Colliers International (Tory Packer and Wayne Lawrence). The property was advertised with a net income of $395,095 pa.
• 1183 Hay Street and 1187 Hay Street, West Perth – two, two-storey office buildings with a combined net lettable area of 711 sqm. Under contract with settlement expected June 2021; agent, JLL Perth (Sean Flynn and Nigel Freshwater).
• 800 Hay Street, Perth – a single-storey, 468 qm retail arcade. Under offer; agent, Lease Equity Perth (Jim Tsagalis).

While the government touts its efforts to boost home ownership, one real estate network warns that current first home buyer schemes could be a catch-22.

The government has substantially increased property price caps under several of its schemes aimed to help first home buyers into the market, but the PRD Real Estate Group has now argued that participants may be swapping early and/or easier access to home ownership with a debt level they may not be ready to take on.

According to Minister for Housing Michael Sukkar, new price caps for the First Home Loan Deposit Scheme (FHLDS) and the Family Home Guarantee (FHG) acknowledge the challenges of buying a new home or re-entering the housing market.

And while the government’s intention might be good, PRD’s chief economist, Dr Diaswati Mardiasmo, warned of possible long-term challenges for current buyers.

With the FHLDS foreseeing a slim 5 per cent deposit and the FHG an even slimmer 2 per cent, first home buyers and single parents are essentially being asked to service a higher level of mortgage debt, Dr Mardiasmo explained.

For instance, a $600,000 Gold Coast property with a 2 per cent deposit at just $12,000 and a First Home Owner Grant of $15,000 will still accrue $573,000 in mortgage debt, excluding other fees.

Similarly, under the FHG, a $650,000 home in Brisbane, with a $32,500 deposit and a $15,000 grant yields $602,500 in mortgage debt.

Additionally, Dr Mardiasmo said, the new price caps open up a higher probability for certain price bands to inflate, lifting prices on what was once thought of as “affordable”.

“This potentially prices out the next generation of first home buyers and single parents, creating a multiplier effect of reliance on government incentives.”

“It seems that the current government schemes are a catch-22, swapping early and/or easier access to home ownership with a debt level that the target demographic may not be ready to take on,” the chief economist opined.

Looking ahead, Dr Mardiasmo urged the government to closely review current issues in the housing market in order to implement the right policies.

She recommended reestablishing balance by implementing schemes that will add to the supply of housing stock.

“These government schemes add to the demand, and thus must be balanced with schemes that will at least create the same amount of supply,” she highlighted.

Warning of the impending return of migrants, the chief economist judged that “at present our property market is sheltered from international demand”.

“Once again, policy – or more correctly, the right policy – really matters.”

The issue of housing supply has become a hot topic countrywide. Most recently, the Real Estate Institute of Australia addressed the apparent crisis, with its president, Adrian Kelly, calling on the state and federal government to tackle a housing supply plan with “the same spirit, determination and funding we have used to fight COVID-19”.