Historic Lows, 40pc Slump in Residential Turnover: Westpac

Australia’s housing market shows clear signs of a fall in property turnover – after a decline of 45 per cent between February and April – and a 35 per cent drop in new listings, indicating sellers are also pulling back.

Westpac’s Housing Consumer Sentiment index recorded its largest one month decline in April as Covid-19 restrictions hit.

Despite a bounce in May, bolstered by stimulus and better than expected Covid-19 outcomes, the Westpac economists still expect a 40 per cent slump in turnover to historical lows.

Migration and housing demand

In his Tuesday address Prime Minister Scott Morrison said the drop in migration was one of the “concerning economic figures” facing government.

“It’s going to be one of the real impacts of this crisis, because our boarders aren't opening up any time soon,” Morrison said.

Migration has a bearing on housing, and as Covid-19 restrictions lift, its longer lasting impact will be felt on migration flows.

Westpac chief economist Bill Evans expects net migration to roughly halve over the next year from around 240,000 a year to 110,000 a year.

He notes a milder forecast than the federal government’s view, which has tipped net migration to fall by 85 per cent.

“Slower net migration will lower population growth – to 1 per cent a year on our forecasts,” Evans said.

“That in turn will see slower growth in the underlying physical demand for new dwellings – from around 180,000 dwellings a year to 130,000.”

Up from the federal government’s view of 100,000.

“While this is less of an issue, as new building pulls back sharply near term, it may become a problem if an eventual recovery in construction runs ahead of migration,” Evans said.

“It also means some of the key drivers of growth and housing market strength in markets such as Sydney and Melbourne will be much more muted.”

Housing market

Annual price growth in Sydney is still at 14.8 per cent but has been running at a 2 per cent pace over April - May.

Melbourne prices show declines centred in the city’s inner areas, suggesting a hit from the migration and foreign student sectors.

Melbourne prices have seen declines with a 0.3 per cent dip in April and a 0.5 per cent decline in May. Melbourne annual price growth remains above 10 per cent.

Evans notes Queensland remains better placed. April prices held relatively firm across the Brisbane, Gold Coast and Sunshine Coast markets.

While Western Australia remains fragile, with Perth dwelling prices still down 2.5 per cent after years of decline, but Westpac notes it should be one of the least exposed to a shock.