Housing turnover reaches a 12-year high
Australia experienced the highest number of annual property sales since 2004 in the year to end August 2021, according to property insights and analytics group, CoreLogic.
CoreLogic estimates there were almost 598,000 house and unit sales across the country, translating into a 42 per cent jump in sales over the previous year to August.
“Such a significant surge in housing demand may seem surprising at a time when overseas migration has stalled,” says Tim Lawless, research director at CoreLogic.
“However, the substantial rise in home sales can be explained by a lift in domestic demand from previously low levels. Housing turnover (annual home sales as a percentage of total dwellings) trended lower from late 2015 as credit conditions tightened, housing affordability became more challenging and transaction costs, such as stamp duty, became increasingly expensive as prices rose.
“National turnover reached a record low in June 2019 when only 3.7 per cent of Australian homes transacted over the year. Since then, credit policies have loosened and mortgage rates have reduced to record lows, encouraging more Australians to participate in the housing market.
“Additionally, a higher rate of household savings since March 2020 has boosted consumer deposit levels and mortgage serviceability, while government incentives such as stamp duty concessions and deposit guarantees have also supported demand.”
Although there may be a rise in activity post-lockdown, Lawless says home sales are likely to reduce over the medium-term due to several factors:
• The ratio of housing prices to household incomes is moving to new record highs across most of the capital cities and regional housing markets. Worsening affordability is likely to progressively prevent more buyers from participating in the housing market.
• Renewed focus on lending standards could amplify affordability challenges. With policymakers and lenders becoming more focused on the quality of lending, it’s likely borrowers with small deposits or high loan/debt levels relative to their incomes will find it harder to secure a loan.
• A lift in overall stock levels. As Australia moves through a broad-based upswing in residential construction activity, it could dampen the turnover rate even if the number of home sales remains steady.
• Low to nil overseas migration will progressively weigh on housing demand.
Offsetting these headwinds is the fact that mortgage rates are set to remain at record lows for an extended period, economic conditions should improve as lockdowns ease and labour markets tighten.
Longer-term, Lawless says a move away from property transaction disincentives, such as stamp duty, would help to support higher turnover. Previous research from CoreLogic showed transactional costs, along with raising a deposit, were the biggest barriers to housing affordability.
“It’s encouraging to see state governments in the ACT, SA and NSW transitioning away from stamp duty, albeit with different strategies and progress, which should help to remove disincentives for homeowners and prospective buyers to transact in the housing market.”