House Price Harry, our new financial markets expert, shares his expert insight into house price betting with regular tips for Australian Residential Property Price Indexes for every quarter.
Betfair will be offering these markets for all state and territory capitals across the country, with House Price Harry drawing on his wealth of experience in the economic sector to share his thoughts and best bets for each of the cities as well as the national average.
The influential Corelogic house price series for April is out and it confirms a cooling in house prices in most cities.
For now, this means mostly a slower rate of increase with the notable exceptions of Melbourne where prices dipped 0.3% in the month, while Hobart recorded a fall of 0.1%.
In terms of the markets on offer, the updated data presents an opportunity to recast the analysis of each market.
Prices were up 0.4% in April even though there was a collapse in new sales and a surge during the month in the number of rental properties on offer. This flood of supply of rental properties may suppress demand from investors in the months ahead. There is residual weakness to come through in the remainder of the June quarter which makes the “Decrease by 0 to 2.0%“ look value.
BACK – Decrease by more than 2.0%
Prices fell 0.3% in April and the loss of momentum in the economy suggests greater downside risks. Victoria has some of the strictest lockdown measures in reaction to the COVID-19 crisis which is likely to see its economy more generally be one of the weakest which will flow through to house prices. This makes “Decrease by more than 2.0%” the best bet, albeit at the short odds. Any increase looks a safe lay.
BACK – Decrease by more than 2.0%
Prices rose 0.3% in April but started losing momentum through the month with prices down 0.1% in the final week of the month. Brisbane is likely to be impacted more than other cities by the slump in tourism which is likely to spill over to substantial declines in house prices. It remains the case that “Decrease by more than 2.0%” is the favoured outcome.
BACK – Decrease by more than 2.0%
Prices rose 0.2% in April after several months of similarly small increases. It is important to note that with the crash in the mining investment, Perth house prices fell over 20% in the period from 2014 to late 2019. Prior to the onset of COVID-19, and with the mining recovery gaining strength, Perth was the city with the best house price upside.
Even though the COVID-19 lockdown will impact activity, mining activity has remained strong, there is value in both the “Increase by 2.0% or less” with a saver on the “Increase by 2.0% or more” options.
BACK – Increase by 2.0% or less
Prices rose 0.4% in April, to be the second strongest capital city in Australia. Adelaide did not experience the sharp increases in prices from the middle of 2019 seen in Sydney and Melbourne which suggested less short-term downside risks.
Adelaide will, nonetheless, be hit by the economic fall-out from COVID-19 crisis which means an outcome close to 0.0% for the June quarter is on the cards. There is good value in the “Decrease by 2.0% or less” with a saver on the “Increase by 2.0% or less”.
BACK – Decrease by 2.0% or less
Prices were unchanged in April after a period of solid gains. Canberra will be hard by the collapse of foreign student arrivals in the two big universities and what was a solid level of new construction. Prices for the quarter remain on track to weaken and “Decrease by more than 2.0%” is the favoured outcome. There appears very little prospect for any price rise in the June quarter.
BACK – Decrease by more than 2.0%
Prices fell 0.1% in April and are on track for further falls. Tasmania has a strict imposition on social distancing and lockdown laws and closure of the State borders will have a severe impact on tourism and education, and investors will have been forced away. While short odds on, the “Decrease by more than 2.0%” looks a safe bet. Again, there seems little prospect of prices rising in the quarter.
BACK – Decrease by more than 2.0%
Prices registered a surprise 1.7% rise in April but it must be noted prices had fallen by more than 25% from the recent peak. With the early ending of the lockdown laws, including open inspections of property sales, this is one market where the risks are for prices to rise. It must be noted that the price data for Darwin can be volatile.
Prices rose 0.3% in April, but the weighted average of the above analysis suggests lower prices over all are likely in the June quarter. There is a solid chance that with resilience in some cities, nation-wide prices will drop by less than 2.0% which makes the “Decrease by 2.0% or less” value at current pricing, although “Decrease by more than 2.0%” could quickly gain momentum if economic conditions deteriorate during May.
BACK – Decrease by 2.0% or less
House prices will come under huge pressure as the economy tailspins into its deepest recession in at least 30 years.
Or will they?
Will investors who have had their share portfolios decimated during the COVID-19 crisis look to the safe haven of residential property and prices will keep rising? Record low interest rates present a huge incentive and opportunity for buyers to step up.
The vast majority of economists are forecasting house prices to fall, with the rise in unemployment crippling new demand and some forced sellers emerging as financial hardship triggers a selling panic.
Throw in the difficulty for buyers to look at property with group open house inspections banned under the social distancing laws, and the pessimistic take on house prices is more likely to be right than wrong.
Already, in the early days of April auction clearance rates have plummeted. Buyers have stepped away.
In betting on the Australian Bureau of Statistics residential property price index, you can look to nine different markets – each State and Territory capital city plus the national average.
And each market will be influenced by different pressures, much as they have over many decades. Perth, for example, is heavily influenced by activity in the mining sector, while Sydney can be influenced by foreign purchases and the investor market.
For the price index for the June quarter, beware – the data are generally calculated using settlement data and therefore there is a measurement lag in the hard data. This means that residential property sold at auction or even in a private treaty today will have their price data show up in a number of weeks.
There are five markets offered for each city for the June quarter 2020:
Aided by the caveat of the lags in the price measurement, the history shows that when Australia-wide dwelling prices have started to fall, the first quarter of decline is usually less than 2.0% – it is usually not a free fall.
That is usually – is this time different?
Each city has been examined and as noted, there was different price momentum prior to the onset of the COVID-19 crisis. Perth, for example, which had endured around six years of price declines was starting to edge higher.
During the quarter, you can get a good feel for the way the market is unfolding by looking at the daily Corelogic data, which covers the 5 main cities, Sydney, Melbourne, Brisbane, Adelaide and Perth. The other 3 cities, Canberra, Hobart and Darwin are covered in Corelogic’s monthly house price data.
Based on a range of inputs, without reference to the odds which are being set by punters is as follows:
Sydney
BACK – Decrease by 2.0% or less
Melbourne
BACK – Decrease by 2.0% or less
Brisbane
BACK – Decrease by more than 2.0%
Adelaide
BACK – Decrease by 2.0% or less
Perth
BACK – Increase by 2.0% or less
Canberra
BACK – Decrease by more than 2.0%
Hobart
BACK – Decrease by more than 2.0%
Darwin
BACK – Decrease by more than 2.0%
Weighted Average
BACK – Decrease by 2.0% or less
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