Impact of Covid-19: Weekly market wrap with Sam DodimeadBack
Is COVID-19 impacting Canberra’s property market?
The biggest difference in our property market attributed to COVID-19 is a shift from offering homes as open for inspection, to either opening for individual appointments or online inspections. Vendors, buyers and agents who aren’t used to transacting in this way may have an adjustment period; however, for those who are used to selling off-plan it is very much business as usual.
ABS data for the average new home loan size shows it has been increasing during the last 12 months, as interest rates have fallen. This shows borrowers are comfortable taking larger mortgages, providing their repayment costs remain similar. In only 16 days, the Reserve Bank of Australia (RBA) cut interest rates by 0.5% which was quickly followed by lenders offering very low one-, two- and three-year fixed rates.
Canberra’s population grew 1.5% in the last 12 months, and during this time it has maintained the lowest national unemployment rate, with a highly-skilled workforce and the highest national median income. The increase of property enquiries during the last week is an early indicator there are a significant number of people seeking to use current market conditions and upgrade their home or invest.
Aside from cheap money flowing into the market, banks themselves have stepped in to prop up any downside market risk by offering property owners affected by COVID-19 repayment ‘holidays’ of up to six-months. The RBA can control bank funding costs, which creates significant scope to help property owners and the economy through recovery.
With the availability of low rate and fixed term mortgages and increasing applicants borrowing capacity significantly, combined with repayment holidays and government stimulus to boost the economy, does this mean Canberra property owners or those considering entering the market get to enjoy the best of both worlds?
Screws turn on Canberra’s tightening rental market
During February, the rental market tightened significantly with vacancy rates in Canberra only 1%. Nationally, most state capitals recorded minor declines in vacancy rates with the exception of Hobart, which recorded a 0.3% increase. Adelaide remained stable at 1.0%.
Managing Director of SQM Research, Louis Christopher, said “February marks the start to the New Year in the property industry and gives us a clearer picture of the rental market. The decline in vacancy rates is a reflection of a seasonal increase in rental demand plus ongoing decline in dwelling completions and the ongoing increase in population. We are likely to record further declines in rental vacancy rates as 2020 progresses unless the country enters into a prolonged economic depression.”
Units experienced strong demand in the rental market, which has led to asking rents increasing by 1.9% year on year. Asking rents for houses fell by 2.4% over the same period. The Australian Bureau of Statistics’ (ABS) new dwelling approvals show a 26.8% reduction in the number of new dwellings during the last 12 months. Falling approval volumes, combined with the timeframe to secure new approvals and construct projects, make it difficult to increase supply into the rental market quickly. Units generate exceptionally high rental yields of 5.5% for all units and 5.8% for those with two bedrooms.
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