Solid under pressure: Weekly market wrap with Sam DodimeadBack
Solid under pressure
CoreLogic reported Canberra’s preliminary auction clearance rate last weekend (14-15 March) was 69.4%, even though there was a significant week-on-week increase in the volume of stock taken to auction.
The Canberra Day long weekend of 7 March saw only 23 properties scheduled for auction compared with 52 on 14 March. Compared to the same weekend last year, the preliminary clearance rate was 20.1% higher with 17 fewer homes taken to auction. This indicates buyers are still ready, willing and able to make property decisions now.
Nationally, there were 2,220 properties scheduled for auction, recording a preliminary clearance rate of 70.6%. During the same weekend last year, 1,875 properties were auctioned achieving a clearance rate of 51.4%, indicating improved buyer demand across national markets.
Why is there strong buyer demand in the current climate?
COVID-19 has had a significant impact on global equities markets as investors face the dilemma of pricing risk into market conditions. At the time of writing, this had caused the S&P/ASX200 to fall from 7,112.20 to 5,121.50, or the market value to reduce by almost 28%. This has led to the Federal Government and Reserve Bank of Australia (RBA) implementing measures to stimulate the economy.
The Government announced plans to inject $17.6 billion into the economy through measures designed to support small to medium enterprise and maintain employment. This appears to be their first step with more stimulus to follow if, or when, required.
At its meeting in March, the RBA cut interest rates by 0.25% with it becoming increasingly likely rates will be cut by a further 0.25% in April. This would result in the cash rate falling by 1% during the past year. In addition to cutting interest rates, the RBA stands ready to start buying Government Bonds and plans to announce further policy measures to support the economy on 19 March.
Louis Christopher of SQM Research modelled similar circumstances in his Housing Boom and Bust Report 2020. On 16 March I called Mr Christopher, who stated should COVID-19 persist for another few month, the economy risks deteriorating to the point of reaching Scenario 4 outlined within his report. This scenario forecasts Canberra to have the strongest performing capital city property market.
For most property markets this would be a cause for concern, however Canberra’s property market has historically demonstrated resilience to adverse market forces. The RBA cutting interest rates alone continues to increase borrowing capacity, allowing Canberrans to borrow more without increasing their mortgage repayments. This, combined with the Government stimulus package, broader measures by the RBA to support the national economy, and Canberra’s robust local economy comprising highly skilled workers and the lowest national unemployment rate, provides plenty for current and would-be property owners to remain optimistic about.
Find up-to-date local news, lifestyle, entertainment, sports and more at Canberra Weekly.