After several record-breaking months, the housing market has now started to show signs of cooling down, a recent report has revealed.
REA Insights’ Housing Market Indicators report for May 2021 has found that while the housing market remains “undoubtedly strong”, with many of the metrics still at elevated levels compared with a year ago, it has since eased back from recent historic highs.
Preliminary weekly sales volumes, for instance, have increased by 116 per cent nationally over the week ended 9 May 2021 compared with the same period last year.
Further, the first 19 weeks of 2021 saw 57.4 per cent more preliminary sales than the first 19 weeks of 2021, with most states recording a 50 per cent annual increase in sales volumes.
However, comparing the latest results to recent pre-Easter highs, sales volumes have noticeably eased.
During the 13th week of 2021, 7,665 properties were sold — the highest level over the year thus far. This has since declined to 5,558 on the 15th week, before rising back to 6,701 on the 19th week.
According to property research analyst Cameron Kusher, while low borrowing costs continue to drive demand, “sales volumes have eased back from highs, as have search volumes, and I would expect a further moderation in sales over the coming weeks”.
Indeed, enquiry levels have also remained much higher over the year, but lower than recent and historic highs.
realestate.com.au recorded a 46.3 per cent increase in “for sale” searches compared with a year ago, but weekly “for sale” search volumes have trended lower over the recent week and are currently -8.4 per cent below their historic high. Search volumes are also lower across all states and territories.
Enquiry levels for new homes have followed the same trend, with land estate enquiry only 189.4 higher than April 2021 — declining from March 2021’s 262.1 per cent increase and June 2020’s 339.6 increase as the end of HomeBuilder impacted demand.
Despite affordability concerns, higher-priced property searches continue to increase in popularity, according to the report.
In April 2021, 42.6 per cent of searches in capital city regions and 22.5 per cent in regional areas were filtered to a maximum price of at least $1 million, significantly higher compared with shares of 34.1 per cent and 14.4 per cent at the same time last year.
Conversely, searches under $500,000 have fallen from 18.8 per cent a year ago to 12.7 per cent this year in capital city areas and from 35.3 per cent a year ago to 27.0 per cent this year in regional areas.
“While low borrowing costs and a lack of international travel has driven more demand for housing, as affordability pressures rise with strong increases in prices, it will be interesting to see how much further this trend runs especially with a number of indicators having weakened from their recent peaks,” according to Mr Kusher.
Further, capital city buyers have also shown affinity for more bedrooms, with 67.1 per cent of searches filtered for at least three bedrooms, up from 64.1 per cent a year ago.
In contrast, regional market searches for properties with three or more bedrooms sit at 72.5 per cent, declining from last year’s 74.1 per cent.
“The capital city trends are likely attributable to lower investor demand resulting in reduced interest in one and two-bedroom apartments,” Mr Kusher said.
“In regional areas, the falling share of searches for three or more bedrooms over the past year is likely attributable to investor interest shifting to regional areas, with people happy to own smaller holiday homes/units and investment properties in these areas.”
Ultimately, the property market is expected to remain strong in the coming months as investor demand rises, but it may not surpass its recent highs, the research analyst said.
“We don’t expect the market to come to a grinding halt — prices are expected to keep rising — but we expect that the second half of this year will not see the market quite as strong as it has been over the first half,” he said.
“[After all], an increasing number of buyers have now purchased, incentives have been removed from the market and price increases mean that housing has become less affordable.”