The market dipped again in July, but the story is more nuanced than the headline suggests.
July 2020 was the third month in a row that Australian property values fell, according to CoreLogic’s home value index. But underneath that headline number, there were some genuine signs that the market was finding its footing. If you’re thinking about buying, it’s worth understanding the full picture before you check your borrowing power.
July 2020 overview
CoreLogic’s home value index dropped 0.6% in July 2020, bringing the national median property value to $552,912. It was the third consecutive monthly decline, though the pace of falls remained relatively contained compared to what many economists had feared when the pandemic first hit.
Not all cities moved in the same direction. Sydney fell 0.9% and Melbourne dropped 1.2%, the two largest markets leading the declines. At the other end of the spectrum, Canberra edged up 0.6% and Adelaide gained 0.1%, making them the only capital cities to record positive growth for the month.
Regional markets held up noticeably better than their capital city counterparts. Combined regional areas were essentially flat across July, while combined capitals fell 0.8%. For buyers considering a tree change or sea change, that resilience was becoming harder to ignore.
Signs of recovery
Despite the overall index decline, several leading indicators were pointing in an encouraging direction by July 2020.
Real estate agent activity had recovered back to 2019 levels after plummeting around 60% in mid-March when COVID restrictions first kicked in. New property listings jumped 46% compared to earlier in the year, and new capital city listings came in 8.9% above where they sat in 2019. Over the three months to July, national home sales were up 2.9% compared to the same period the year before.
The big exception to this recovery story was Melbourne. Victoria’s second wave hit hard in July, with Westpac’s Melbourne Institute consumer sentiment index falling 6.1% to 87.9, down from 93.7 in June. Auctions had bounced back in June, but as Melbourne moved back into stricter lockdown conditions, auction activity weakened again and withdrawn auctions became more common. What was happening in Melbourne was a reminder that any recovery remained fragile and heavily dependent on how the health situation evolved.
The rental market
The rental market told two very different stories depending on where you were looking.
Inner-city Sydney and Melbourne were under real pressure. Border closures had cut off the flow of international students and migrants who typically fill inner-city rentals, and some suburbs saw rental listings more than double since March. That oversupply was putting downward pressure on rents and making life difficult for landlords in those pockets.
Perth and Adelaide told a very different story. Both cities were showing strong rental conditions, supported by lower levels of investor participation over the previous few years and less investment-grade apartment construction. Tighter supply meant those markets remained more balanced for landlords and property managers.
If you want to dig into how Sydney and Melbourne specifically fared through the 2020 market, take a look at how the 2020 property market shaped up for Sydney and Melbourne.
What's ahead
The medium-term picture carried a few risks worth keeping in mind as you planned your next move.
Mortgage repayment holidays that the banks had offered at the start of the pandemic were due to wrap up around March 2021. That meant a significant number of borrowers who had been deferring payments would need to resume them, or make decisions about their property if they couldn’t. Government stimulus was also set to taper off as the year wore on.
Taken together, these factors meant the medium-term outlook was skewed to the downside. Analysts were flagging that urgent property sales were likely to become more common as those support measures wound back. For buyers, that could create opportunities, but it also meant staying informed and being prepared to move when the right property came along.
NSW stamp duty changes
Good news for first home buyers in New South Wales landed just in time for August. From 1 August 2020, the stamp duty exemption threshold for first home buyers purchasing a new home lifted from $650,000 to $800,000.
That’s a meaningful change. Buying a newly built home in NSW priced at up to $800,000 now meant you paid zero stamp duty, which could save you tens of thousands of dollars that you’d otherwise need to find on top of your deposit and other purchase costs.
If you’re not sure what stamp duty applies to a property you’re considering, use our stamp duty calculator to get an estimate based on your situation.
First home buyer schemes
First home buyers in mid-2020 had access to a stack of government support that made getting into the market more achievable than it had been for a while.
Used together, these schemes could significantly reduce the upfront cost of getting into the market. To see how conditions continued to shift after July, see how the market bounced back in October 2020.
Common questions
Q: Why did Melbourne and Sydney fall the most in July 2020?
Sydney and Melbourne are Australia’s two largest and most expensive markets, which makes them more sensitive to economic uncertainty. Melbourne was hit hardest because it moved back into a second lockdown in July, which knocked consumer confidence sharply and caused auction activity to stall. Sydney’s decline was more moderate but reflected the broader caution buyers and sellers were feeling. Both cities also have a higher concentration of investor activity compared to smaller capitals, and investors tend to pull back faster when sentiment turns.
Q: What does the NSW stamp duty change mean for first home buyers?
From 1 August 2020, first home buyers in NSW purchasing a newly built home priced up to $800,000 became exempt from stamp duty entirely. The previous threshold was $650,000. That $150,000 increase in the exemption ceiling opened up a wider range of properties, particularly in outer metro areas and new estates where new builds in that price range are more common. If you’re buying in that range, the saving can be substantial, often $20,000 to $30,000 depending on the purchase price.
Q: What were the first home buyer grants available in 2020?
In 2020, first home buyers could potentially access several forms of government support. The First Home Loan Deposit Scheme allowed eligible buyers to purchase with a 5% deposit and no lenders mortgage insurance. The HomeBuilder grant provided $25,000 toward building a new home or doing a substantial renovation. The First Home Owners Grant offered additional state-based assistance for eligible purchases of new homes. The amounts and eligibility criteria varied by state, so it was worth getting tailored advice to understand what you could access based on your specific situation.