A large share of properties hitting the market this year were owned for three years or less, but the reason why isn’t what it might initially seem.
The share of short turnaround listings has picked up over the past couple years, after bottoming out during the pandemic, and is currently sitting around the highest it’s been over the past five years.
These are sellers that would have bought their property after the pandemic started in early 2020.
It’s not just the share that’s increased either. The actual number of short turnaround listings is up compared to 2021. That’s despite the fact that we’ve seen fewer new listings overall this year than in 2022, which is also driving up the share – the numerator is up, and the denominator is down.
This increase isn’t just driven by owner-occupier or investors. We’ve seen increases for both groups compared to what we were seeing in 2020 and 2021.
At the same time, we’ve also seen an increase in the investor share of new listings.
While it’s not nearly as high as we were seeing in 2021, investors are making up a larger share of newly listed properties in 2023 than they were through much of 2022, or pre-pandemic.
That’s happening in an environment of slower new listings activity overall. So while the investor share of new listings is up, the actual number of new investor listings is lower than it was during early 2022 – it’s just that new listings by owner occupiers have slowed even more.
So what’s driving the increase in short turnaround listings? Is it a sign that homeowners, and investors especially, that bought during the pandemic are now struggling with higher mortgage repayments and being forced to sell?
While that’s probably happening in some cases, it doesn’t seem to be the key driver in aggregate.
The areas where we are seeing the biggest increase in short-turnaround listings are areas where prices have outperformed in the recent period – a pattern that’s consistent across the country.
While most parts of the country have seen an increase in the share of short-turnaround listings compared to what’s been typical in the past five years, the biggest increases are happening in areas where prices have grown the most.
Areas that have seen particularly large increases in the share of short turnaround listings include places like Toowoomba, the Mandurah region south of Perth, or Ipswich in Brisbane’s west. The share of short-turnaround listings is close to 8 percentage higher than what’s been typical for these regions over the past 5 years.
These areas have also all experienced strong price growth in the past year – up 7% or more, and nearly 11% in the case of Mandurah.
This pattern isn’t confined to either owner-occupiers or investors. That same relationship between a higher-than-typical share of quick sales and stronger-than-average price growth holds for both groups.
So while sharply higher mortgage repayments are likely to be part of the story for some sellers, it doesn’t seem like it is a key driver in aggregate. It’s hard to see why higher mortgage repayments would be forcing people to sell only in areas where prices have grown, and not in areas where prices have fallen in the past year, or just grown more slowly.
This tracks with other, much narrower and more lagging data, on mortgage stress.
Data from the banking regulator shows that, at least to date, the share of loans that are non-performing remains very low – lower even than pre-pandemic.
Similarly, the share of loans that are between 1-3 months behind on repayments remains low. It has ticked up a little in 2023 from where it was in 2022, but it remains lower than pre-pandemic.
That’s not to say that mortgage repayments aren’t straining household budgets.
Sharply higher interest rates, many households rolling off fixed rates, and high inflation are all straining household budgets. That will make mortgage repayments a significant burden for many households.
But, at least so far, we haven’t seen signs that pressure is leading to swathes of households getting behind on their mortgage, or forcing people to sell.
Sourced from realestate.com