The HomeBuilder federal stimulus will hopefully provide a welcomed boost to sales activity in the house and land market. Luke Kelly, RPM Director, looks at current market conditions and the likely impact of the government’s grant program.
What is the data telling us about enquiries and deposits taken recently?
The fact of the matter is we have seen increasing enquiry week-on-week in April and May – we know the first weekend in May was better than the first weekend in April, for example.
In total, new enquiries have tripled over the period end-March to end-May. New enquiries for April are up 77% from the previous month – our highest result since April 2018 when the market was at its peak of sales.
Week-on-week we have also seen increases in the number of deposits taken.
Our feeling is that people generally have more certainty now – they’re adjusting to the new normal, they might have a better sense of how secure their job is, and they’re in a better mindset to put down a deposit.
Enquiries and deposits are up, but contracts are taking longer to finalise…
We are finding the process of securing finance is taking longer – around three to four weeks in most cases. So, the turnaround time between deposit and moving to contract stage is longer than usual. And not all contracts are converting.
This protracted time frame is also partly due to lenders assessing the job security of applications more closely than in the past.
The sales data reflects this, with March sales reaching 1,045 – down 25% from the previous month (noting that the bulk of these sales were recorded in the first two weeks of March). And while lot sales in April totalled only 638, this result was still above the trough which was recorded in April 2019 (499 lot sales).
What are the likely implications of the Federal Government’s industry stimulus package?
We certainly expect to see a boost in sales, in particular, due to the inclusion of an expiry date on the stimulus package, buyers will need to purchase before the end of the year with construction to commence within three months of the contract date.
We would anticipate a surge in sales of titled or soon-to-be-titled lots, as people seek to secure land they can start building on without delay. This will allow buyers sufficient time to organise their finance, lot purchase and build.
The government stimulus package will create buyer demand to snap up a limited number of lots, available for a limited time only. It will naturally result in a ‘pull forward’ of buyers by creating a window of opportunity, within which buyers will have to act fast to secure a limited pool of lots.
Have buyers been taking a ‘wait and see’ approach, in anticipation of a stimulus package?
We have seen people waiting to see what happens when JobKeeper finishes and how that impacts the economy.
For this reason, we support the government’s announcement being made swiftly – to give people the confidence to move forward with their property choices (if they have put down a deposit, to move to contract stage, or if they have been inactive, to start looking at opportunities to buy).
We expect the government stimulus to essentially bring forward local buyers – people who have been sitting on the fence, or haven’t been in a secure enough position – which will in turn help fill the gap left by reduced immigration.
What is the current level of titled stock available?
At the end of April there were 6,800 lots on the market, of which approximately 2,700 are titled (based on an average 40% of all lots being titled last quarter).
Based on current titled stock on the market (2,700 titled lots) and current sales rates (638 lots sold in April), there is only about three to four months of supply on the ground in and around Melbourne as we would expect sales to improve from the April result.
What buyer segments will benefit from the stimulus package?
It’s good news for most buyers, in particular, a blessing for first homebuyers, but also second and third homebuyers who might be motivated to upgrade sooner. First home buyers can also access the Commonwealth’s First Home Loan Deposit Scheme and the State Government’s first homeowner’s grant of $10,000 or $20,000 for homes in regional areas. Additionally, first home buyers are also exempt from paying stamp duty on properties valued up to $600,000. If you have the means, there couldn’t be a better time to buy.