It is expected that sales activity will slow in the medium term after reaching its peak level in 2004.

CoreLogic estimates that Australia saw nearly 598,000 house and unit sales in the year ended August 2021. This is the largest annual sale since 2004.

Sales increased 42% annually compared to the twelve-month previous.

The gains were 31% greater than the 10-year average and 24% more than the 20-years average.

Factors that drive sales or turnovers

CoreLogic Research Director Tim Lawless explained that while this may not be surprising, considering the stagnation in foreign migration, the growth could be explained by an increase in domestic demand.

He explained that “Housing turnover decreased from late 2015 due to credit conditions becoming tighter, housing affordability becoming more difficult, and transaction cost such as a Stamp Duty becoming more expensive as prices rose.”

With only 3.7% of Australian households transacting in the year, turnovers were at their lowest level.

Lawless stated that credit policies have been relaxed since then and that mortgage rates have fallen to an all-time low. This encouraged more Australians in the housing market.

He stated that higher rates for household savings have helped to increase consumer deposit levels, mortgage servicingability, and stamp duty concessions have supported the demand.

The August 2009 housing turnover was 5.6%, the highest since December 2009.

Queensland has the highest turnover

Queensland, with 6.8% of all properties involved in transactions, had the highest turnover rate of any state.

Sunshine Coast is responsible for this, as it saw its highest turnover rate since June 2008.

Lawless said that the higher turnover rate was due to interstate migration and relatively lower housing prices than Victoria and New South Wales.

ACT ranked second with 6% of its total properties changing hands over this period.

Lawless said that Canberra had seen an increase of investment activity. This resulted in a rise in the turnover rate.

The Northern Territory had the lowest turnover rate at 3.7%. This was a significant improvement over the June 2020 low at 2.4%.

Lawless stated that despite home sales increasing almost 60% in the past year, annual sales were still 12% lower than the 20-year average across the NT. This highlights the strength of the demand from previous growth cycles.

Victoria’s turnover rate of 4.6% was second. The lockdowns have had negative effects on the state. Another problem was housing affordability in the state.

“Also, a large number of newly built dwellings has added to the state’s overall housing supply. Over the past five years, Victoria’s dwelling count has increased by 280,900, the largest increase of any state or territory,” Mr Lawless said.

Annual sales expected to be moderate

The annual sales figure is still very low, so it is possible for turnovers to increase.

Lawless indicated that turnovers could be at their highest point in the near term by early 2022. Lawless stated that there are already signs for a slowdown of home sales.

Due to several factors, there may be a continuation in the moderation of home sales in the medium-term.

In most markets, the ratio between household income and house price has reached record levels. This means affordability is at the top of the agenda.

Lawless stated, “Worsening affordability is likely to progressively hinder buyers from participating in the housing market.”

This is being amplified with a renewed focus on lending standards.

“With policy makers and lenders becoming more focused on the quality of lending, it’s likely borrowers with small deposits or high loan/debt levels relative to their incomes will find it harder to secure a loan,” Mr Lawless said.

An increase in home supply could affect the turnover rate, even though existing homes sales remain constant.

Lawless is adamant that these headwinds will be offset by record-low mortgage interest rates and the expectation that they will remain at record levels for the long term.

He stated that the shift away from stamp duty and property transaction disincentives would encourage higher turnover in the long-term.

“It’s encouraging to see state governments in the ACT, SA and NSW transitioning away from stamp duty, albeit with different strategies and progress, which should help to remove disincentives for homeowners and prospective buyers to transact in the housing market.”