NSW Supply & Demand Imbalance – Which Way Will It Tip? - August 2020
By Guest Blogger, Leanne Pilkington, Managing Director,
Laing & Simmons and President REINSW
Despite prevailing concerns in the media about the economy and the potential impact on property, the NSW real estate market continues to defy expectations. One reason is the fundamental undersupply of housing. Owning a property, even in times like these, provides a sense of security.
The other reason is the strength of demand from buyers, especially experienced buyers, who quietly appreciate the media’s current subdued reporting on property.
It means they can implement their plans under the radar.
As spring approaches, we always expect to see an increase in the number of properties coming onto the market. No year in our history has been like 2020 but even now, this time-honoured trend is playing out. Listings are slowly increasing week by week.
Yet it’s having no impact on demand. Clearance rates are a key indicator, and these continue to hold firm. Vendors who take their properties to market are tapping into a willing buyer pool. We can expect more to do so in coming weeks and months.
According to CoreLogic’s Early Market Indicators, week-on-week pre-listing activity turned a corner from mid-August to show a positive increase. Mortgage activity also showed a week-on-week increase for the same period.
More listings and more buyers willing to transact is an early indication of what spring might hold: a step, if not a leap, in the right direction for the market in a transactional and price sense.
Typically, as winter draws to a close, eager journalists and mouthy agents will start to get bullish about the coming onslaught. But every economic discussion at the moment comes with a coronavirus asterisk.
No-one wants to declare, with authority, that a pick-up in the market awaits. And that suits savvy buyers just fine. A renewed sense of clarity had already emerged between buyers and sellers during the pandemic.
Many people are reconsidering the suitability of their current homes as lockdown has amplified some shortcomings. Many people now have a clearer picture of what they want. Price heat left the market but panic-selling never materialised, and schemes like JobKeeper continue to play a key role.
It means most vendors have been able to hold onto their properties with a view to staying put. But it doesn’t mean they should.
On the buyer side, more people have commenced looking for a more appropriate home for a less certain future, and long-term low interest rates are giving them the comfort to do so.
It all comes back to supply and demand and on this front, the pandemic has not affected the fundamental undersupply of housing. To meet population forecasts, NSW Government figures show Sydney needs one million more homes by 2041, delivered at the rate of 40,000 new homes each year.
It’s a tall order. Too tall, for now.
The supply-demand imbalance is here to stay. In New South Wales, the Housing Industry Association (HIA) has tipped detached dwelling starts to decline by 9.6 per cent to 20,426 in 2020-21. But the real intriguing stat relates to the apartment market: the HIA reckons apartment commencements will drop 41 per cent from 71,600 to just 42,100 in 2020-21.
It will take some years for house and unit commencements to recover. As such, we can expect the available supply to continue to be steadily absorbed in the foreseeable future. And we can expect it to occur with less than the usual fanfare.
We’ve talked about savvy buyers mobilising behind the scenes, but savvy vendors are doing likewise. They recognise that the supply-demand equation is no equation it all. It’s stacked in their favour.
Those with property hold a considerable balance of power. That’s why their confidence is justified.
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