REA Insights Housing Market Indicators Report May 2021

The volume of email enquiry to residential real estate agents fell for the third successive month in April 2021. While the volume of enquiry continues to fall, enquiries for houses remain dominant (62.7%) compared to units (26.7%) and land (10.6%).

Although there has been a recent drop-off in enquiry volumes, it was still significantly higher in April 2021 than it was a year ago, up by 24.6% for houses, 33.4% for units and 31.0% for vacant land.

With sales volumes strong, search volumes easing back over the past month and HomeBuilder having ended, it wouldn’t be a surprise to see a further decline in email enquiry over the coming months given that many prospective buyers have now purchased and there is seemingly fewer buyers in the next wave and housing costs are becoming more expensive as prices rise.

In April 2021, email enquiries from buyers accounted for 62.3% of all enquiry which was an historic high. Separately email enquiry from first home buyers continued to drift lower accounting for 20.5% of all enquiry while investor enquiry accounted for the remaining 17.3% which was its highest share since March 2020.

Compared to the same time last year, buyer enquiry is currently 29.3% higher, first home buyer enquiry volumes are 0.7% higher while investor enquiry has seen the largest increase up 84.2% year-on-year.

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With HomeBuilder having now ended it seems likely that first home buyer enquiry will continue to soften while tight rental market conditions and attractive yields and capital
growth potential will likely lead to an ongoing uplift in enquiry coming from the investor segment of the market.

Despite some recent increases, the supply of stock listed for sale has generally been much lower than the level of demand since the end of lockdowns last year which has resulted in some significant increases in views per listing.

Average views per listing in April 2021 were slightly lower than they had been in March however, they are 86.3% higher than they were during last year in lockdown-affected April 2020. NSW and Tas have recorded the largest year-on-year increases in views per listing and NT and WA have recorded the smallest increases, albeit they are both up more than 50% on a year ago.

We expect that views per listing will continue to ease with a heightened volume of new stock coming to the market, sales volumes slowing somewhat and fewer overall buyers searching for properties.

Preliminary weekly sales volumes nationally were 116% higher last week than they were over the same week last year. While sales volumes remain much higher than they were a year ago it is noticeable that sales volumes have eased from their pre-Easter highs.

Over the first 19 weeks of 2021, there has been 57.4% more preliminary sales than there were over the first 19 weeks of last year and as the chart shows, in most states, sales volumes are more than 50% higher than they were at this point last year.

With borrowing costs at historic lows, we would expect that transaction activity will remain strong over the coming weeks, however, sales volumes have eased back from highs as have search volumes and I would expect a further moderation in sales over the coming weeks.

Days on site recorded a moderate increase in April after having trended lower since the middle of last year. It is important to note that the rise is likely seasonal with public and school holidays during the month.

Download the REA Insights Housing Market Indicators Report – May 2021

The typical property that sold on realestate.com.au during April 2021 had been on the site for 38 days, up from 34 days in March but down from 52 days at the same time last year.

WA and ACT were the only states and territories in which days on site didn’t rise in April 2021 however, days on site across all states is lower than it was a year ago with WA (21), NSW (12), Qld (12) and ACT (12) seeing the greatest falls and NT (6) and Vic (9) the smallest.

The shift towards potential buyers searching for higher priced properties continues across capital city and regional markets. This is evidenced when looking at the change in filtered price searches for dwellings by the maximum price.

In April 2021, 42.6% of filtered searches in capital city regions and 22.5% of them in regional areas had a maximum price of at least $1 million compared to shares of 34.1% and 14.4% at the same time last year.

Unsurprisingly, the shift to more expensive searches has seen a large decline in the share of searches under $500,000 which have fallen from 18.8% a year ago to 12.7% this year in capital city areas and from 35.3% a year ago in regional areas to 27.0% this year.

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.

The share of searches filtered by number of bedrooms highlights that an increasing share of buyers are looking for larger homes in capital cities while regional trends are
somewhat different.

In April of this year, 67.1% of these searches in capital cities were for at least three bedroom (incorporating 3, 4 and 5-bedroom searches) up from 64.1% a year ago. Meanwhile in regional markets 72.5% of searches in April 2021 were for at least 3 bedrooms which was an decrease from 74.1% a year earlier.

The capital city trends are likely attributable to lower investor demand resulting in reduced interest in 1 and 2-bedroom apartments. In regional areas, the falling share of searches for 3 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.

Looking at enquiry to the new homes section of the realestate.com.au website, land estate enquiry in April 2021 was 189.4% higher than it was a year earlier while apartment project enquiry was 129.1% higher.

The number of projects advertised for sale has declined by -3.6% year-on-year for land estates and has risen by 33.3% for apartment projects.

The flow of enquiry has shifted dramatically since the pandemic. Historically apartment projects have accounted for most of the enquiry but with HomeBuilder proving more attractive for land estates, they accounted for 56.2% of all enquiries in April 2021, at the same time a year earlier the figure was 50.4%. With HomeBuilder having now ended it will be interesting to see if these trends shift over the coming months, closed international borders are expected to continue to be a bit of a handbrake on enquiry for apartments.

Download the REA Insights Housing Market Indicators Report – May 2021

Originally published as: REA Insights Housing Market Indicators Report May 2021