Have Australian Property Sales Bounced Back?

(Credits to TRENT WILTSHIRE, domain.com.au)

 

Australian property sales have rebounded from the low point seen in early 2019. But despite the recent turnaround, property sales in Sydney and Melbourne have risen only just above the low points of the past 20 years.

As property prices have rebounded in most capital cities, the turnaround in property sales in recent months is not unexpected. Sydney and Melbourne property prices have been rising for about six months, with larger increases in recent months. Turnover in Brisbane, Perth and Canberra has also increased in the past few months. Other indicators of market conditions, such as auction clearance rates and house price expectations, are also more robust.

Property sales and property price changes typically track each other closely, with price changes often leading turnover. With prices now rising rapidly, property sales will likely bounce back to more normal levels in the year ahead. But it’s unlikely property sales will return to the very high levels seen in the early 2000s.

 

Australian property sales have increased over the past six months

In the three months to the end of August, an estimated 117,300 properties sold Australia-wide (see graph). That’s an increase of just 1 per cent compared to the same period one year ago (recent months are estimates as official sales data does not include all recent sales).

Over the year to August, an estimated 433,500 properties traded hands.

According to “seasonally adjusted” property sales data, turnover reached a low point in the three months to February 2019. Since then, property sales have increased by 15 per cent.

 

As a share of the Australian dwelling stock, estimated annual property sales look to have bottomed-out in recent months (see graph below). On this measure, property sales are currently near the two decade-plus low reached in the June quarter and well below the peak turnover rate of 7.4 per cent in 2013.

Based on the trend of the past 15 years, it seems the new “average” turnover rate is around 5.5 per cent (which implies a property is sold on average every 18 years).

 

Property sales have rebounded rapidly in Sydney

Property sales have increased in most capital cities in 2019. Turnover has bounced back most significantly in Sydney and Melbourne.

In Sydney, the number of property sales is an estimated 17 per cent higher than one year ago (in the three months to August). In seasonally-adjusted terms, Sydney property sales have increased by an estimated 40 per cent since the low-point reached in the three months to February 2019 (see graph below).

In Melbourne, property sales numbers are just 3 per cent higher than this time last year. But property sales have picked up significantly in 2019. In seasonally-adjusted terms, property turnover in Melbourne jumped by 20 per cent since the low point over the three months to February 2019.

In Brisbane and Canberra, property sales (seasonally adjusted) are also on the rebound, up by 9 per cent and 11 per cent compared to the start of the year.

Perth property sales remain at low levels but have increased by 11 per cent compared to the start of this year.

Adelaide property sales are 2 per cent lower than a year ago while Hobart property sales are around average levels and slightly higher than one year ago. Darwin property sales are at very low levels but are higher than at the start of the year.

 

Property sales should continue to rise, which will help the economy

In a recent speech, the RBA governor identified that very low housing turnover has been a factor behind weak consumer spending, “Another part of the explanation for weak growth in household spending is the adjustment in the housing market … With fewer of us moving homes, spending on new furniture and household appliances has been quite soft. So too, has expenditure on moving costs and real estate fees”.

So a turnaround in the number of property sales should give the struggling Australian economy a boost.

Rising property prices in Sydney and Melbourne should contribute to property sales increasing further. With the market rebound underpinned by interest rate cuts and the expectation of more cuts to come, property sales are likely to rise further in the year ahead.