Australian Property Update August 2020

In this property market update for August 2020 we’ll be having a look at some of the data behind Australia’s housing market and try to learn from it so we can invest more successfully.

CoreLogic August 2020 Update Video

Nugget News August 2020 Video

0:00 – Introduction
1:15 – Australian market is in a decline
2:05 – Capital city growth/decline figures
4:21 – Rolling quarterly change
4:59 – National home value index
5:42 – Cash rates at all time low
6:26 – New listings are rising
8:05 – Percent change in dwelling values since COVID Peak
9:33 – The fiscal cliff looming in October
10:44 – Martin North’s example predictions

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Brisbane Property Market Update August 2020


hey i’m ryan from on property and welcome to my australian property market update for august of 2020. what i like to do in these episodes is to talk through where the market is at how is it performing at the moment has it gone up has it gone down what are the trends that we’re seeing and what may happen in the future now i don’t have a crystal ball i don’t know what’s going to happen no one out there really does but i think it’s important for us to look at the data so that we can assess okay what do we want to do how do we want to invest at this point in time whether you’re looking to take advantage of current market conditions and buy in a weaker market where there’s less buyers to compete with maybe that’s you still important to understand the data or if you’re someone who’s like okay with everything that’s happening i actually want to wait this out until things start to improve it’s important to look at the data as well so we’re going to be learning this together talking through this together and i hope that you find this useful we’re mainly going to be looking at corelogic’s market update video and i’ll link up to that in the description down below if you want to go through it yourself as i’ve got more data in there that we won’t necessarily cover in this video they’re great videos i watch them every single month and love them so looking at the australian property market as a whole for the month of june we are now in our third consecutive month of decline so june well july sorry declined 0.6 which was slightly less than june which declined 0.7 percent but yeah we’re definitely in a declining market at this point in time and when i look at the data i find it hard to imagine that the market’s going to grow in the near future so it looks like we might be in the beginning of an entrenched decline unless things start to turn around really quickly now obviously they could turn around things could change but i’m looking at it now and i’m kind of thinking okay we need to prepare for you know potentially a declining market or a stable market in the near future with everything that’s happening globally if we jump ahead and we look at the month-on-month change in dwelling values for the major capital cities as well as the regional areas we can see that almost all the capital cities have seen some decline sydney and melbourne have had the biggest decline so melbourne’s down 1.2 percent which is quite significant really sydney’s down 0.9 if this trend continues like this level of declines if you play that out over a 12-month period you start to see significant declines of somewhere between you know 5 10 15 sort of range in those primary capital cities brisbane’s down less 0.4 percent and if you’ve watched any of my previous videos you know that brisbane didn’t have the big run-up that sydney and melbourne had it’s cheaper to buy now than it was i think 11 years ago or even longer when you count inflation and so yeah brisbane saw some decline but not as much perth declined 0.6 which is really interesting because it’s already had such a big decline it kind of looked like before covert that it was reaching the bottom of its i guess trough the bottom of its decline and that it may start to rise or at least stabilize but that’s now down 0.6 percent so you know this is obviously affecting every capital city hobart’s down 0.2 percent darwin down 0.3 percent adelaide is actually up 0.1 percent and canberra’s up 0.6 percent holding steady there so you can see here really quickly that you’ve got lots of different markets in australia that are being affected at different rates sydney and melbourne had much bigger growth they had growth up until 2017 then they went through a period of decline 2017 to 2019 and then at the end of 2019 both of those markets saw some rapid growth so sydney melbourne had some you know really good run-ups in 2017 and again in 2019 so i would kind of speculate that they would have further to fall than somewhere like brisbane or perth which brisbane’s been pretty steady perth’s already been through a decline but nonetheless you know most of these markets are still in a decline at the moment and we’ll have to keep watching it to see how it goes and to see what happens if we look at our rolling quarterly change in combined capital cities we’ve got this light blue line here and zero percent this is you know when we start to go into the negative so we can see that it was back in 2017 mid 2017 we were in the negatives all the way until when’s that mid 2019 and then you can see that we started to see some really big growth over 2019 and we’ve now dipped back into the negative for those major capital cities so even not just monthly but on a rolling quarterly basis we’re now in the negatives as well you can see here the national home value index which peaked in 2017 at 563 000 dollars for a value of a home and you can see that it went down and declined until mid 2019 and reached its low of around 516 000 then went through a massive run-up in just you know six to nine months almost back up to the peak that reached in 2017 so it reached 562 000 and we’re now on a downward trajectory down to around 550 to 553 000 at the moment so we’ll have to watch this and see you know will it start to level out will it continue to go down i’m not exactly sure cash rates are obviously really low it’s interesting to look at this you’ve got this 10 year average here but that’s really low anyway if you were to look at the average over 30 years or 40 years or 50 years it’s going to be much higher than this 10-year average and you can see that we’ve basically almost reached the floor when it comes to interest rates so how much more can interest rates be dropped you know not not much 0.25 percent i think they can be dropped until we start going into negative interest rate territory and there has been talk that the government is willing to actually go down that route and to do that if required in order to keep the economy going so cash rates really low at the moment probably unlikely to go up anytime in the near future it’s interesting to look at the number of new listings so we can see the number of new listings are reached a very like a low in that april may sort of period when everyone was in um lockdown or just after that when was that it’s hard hard to remember as you can see i’m not in melbourne in lockdown at the moment but that started going up and you can see that the new listings are actually higher than what they were in 2019 now 2019 is kind of the lowest that we saw compared to 2016 17 and 18. so we’re higher than that but we’re not higher than those other years and if we look at the number of total listings they’re still well below what they’ve been in the past so this means okay there’s new listings coming onto the market but they’re actually being purchased and being snapped up or potentially being withdrawn from the market and not sold but you can see that there’s not this a flood of properties going on to the market none of them are being sold and so we’re seeing this total number of listings actually skyrocket so this will be one to watch the number of new listings how high is that going to go as well as the number of total listings that will be really interesting to watch as well you don’t want that to go too high because then we could start to see declines as well usually i would go through each of the cities and to talk about okay where are they at uh what’s the trend in the cities but it’s kind of hard to do at the moment we’re in the early stages of this decline so i feel like a lot of the data around individual cities i just wouldn’t have meaningful commentary on so i’m going to leave that out for this month maybe we’ll go ahead and cover that next month here we have an interesting graph though this is the percentage change in dwelling values since the recent covert peak so since these markets peaked before covert how much of the markets as a whole gone down since this has happened and as we can see sydney and melbourne have gone down the most melbourne down 3.5 percent and i wonder if they’ll continue to lead the charge in declines given that they have the worst hit covet area at the moment melbourne’s in stage 4 lockdown all of that sort of stuff’s happening it’ll be interesting to watch how will that affect property prices compared to sydney who isn’t currently in a lockdown state so there’s not that i guess as much difficulty and as much pressure being put on businesses and the economy in sydney as it is in melbourne so melbourne down 3.5 percent sitting down 2.1 percent perth is actually outstripping sydney in declines at 2.2 percent we can see brisbane’s down 0.9 percent adelaide’s down 0.1 hobart 0.2 darwin 1.6 and canberra is actually steady there so you know it’ll be interesting to watch these and to see how they go still super early days uh in terms of this this market decline and what’s happening with covert we’re not back to normal by any stretch of the imagination it’ll be interesting to watch how the second wave plays out how that affects the economy and how that’s going to affect property prices as well look here at this graph talking about a fiscal cliff that’s looming in october so even though there is still going to be some job seeker and cash flow support and job keeper payments they are getting reduced at the end of september and then again getting reduced in january so we can see here the billions of dollars that the australian government is pumping into the economy and how we’ve got you know in september and october it’s still above that 10 billion but then we can see this huge decline in november december january february march april it is so much less fiscal stimulus that is coming into the market so how will that affect people how will that affect rental stress mortgage stress all of that sort of stuff we’ve got a lot of delayed payments that have been happening with the banks that are due to end towards the end of september or october it’s looking like a lot of them will be able to be extended but maybe they won’t be and so we’ll have to watch and see how that plays out as well it’s going to be around this october november mark that we’re going to really have to look closely at the market and see what’s happening lastly i want to leave you with this table which is generated by martin north and it came out in a video on nugget news about the august property update from them so i’ll link up to that video down below if you want to go ahead and check that out but these are some example predictions of what may happen in the next 24 to 36 months and you know how may home prices be affected and so we can see here that we’ve got the rba baseline home prices plus five percent to minus five percent and the unnatural acts you’ve got easing credit quantitative e easing fiscal stimulus um and then we’ve got kind of like best case scenario i think this is like martin north has kind of created these scenarios and i apologize if i got that wrong but from watching the video it’s like he’s got these scenarios and he’s got the probability of what he thinks these may happen so the probability he’s got at the rba baseline is 2.5 percent at the moment which is not very high uh as his best case uh 20 probability so minus 5 to minus 15 a longer term crunch so when we see a longer term i guess impact of covert and difficulty with the economy we’re seeing higher unemployment rates more mortgage stress more bank losses and home prices to fall between 15 and 30 percent and he’s predicting this at forty seven and a half percent probability we’ve got a second wave disruption obviously we’re seeing the second wave in victoria will we see that second wave across australia that’s unclear at the moment unemployment rates going you know higher again mortgage stress higher again and home prices going from 30 to 45 percent down so some pretty significant price reductions he’s talking about here and a probability of 25 percent and if we have an uncontrolled pandemic then he predicts that home prices could fall up to 80 percent he’s talking about you know lots of quantitative easing he’s talking about bank values happening within that spectrum and that’s only five percent probability so that’s a very extreme one we’ll just have to wait to see how this plays out how the second way that’s happening in victoria plays out if that gets under control and what happens and what other stimulus the government may inject into the economy to keep things going again so it’s definitely it’s not all doom and gloom forever but it’s definitely some serious times at the moment and it’s definitely something to look at something to consider and something to say okay where are we at in the current cycle is this going to be a mid-cycle slow down like me and ben have been predicting and talking about or are we looking at a larger scale event here and how can you use this opportunity to set yourself up for success so whether that be waiting on the sidelines throughout this or whether that be using this opportunity to buy a high quality asset in a good quality area with potential to manufacture growth and get cash flow at this point in time if you’re willing to stomach that risk and you know you believe in the long-term future of the property market then it could be an opportunity for you or you may want to wait out it’s really up to you but it’s interesting watching this it’s interesting seeing how this plays out and how this could play out in the coming months we could see declines like this or if things do start to go back to normal maybe all this fiscal stimulus all of the money that the government’s pumped in could actually see increases so i don’t know i didn’t have a crystal ball i just wanted to share the data with you i hope you found it interesting and exciting insightful and it helps you make your decisions as well i’m going to link up to a video that i did with ben everingham talking more about the brisbane market as he’s recently recently just researched a bunch of suburbs there so i’ll link up to that video go ahead check that out if you want to learn more about the brisbane market at this point in time otherwise until next time stay positive

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