Property inspections play key economic role

Property inspections play key economic role

Realestate.com.au economist Paul Ryan has critically analysed market data from the past 18 months to establish the impact lockdowns have had on the property market, and subsequently the livelihood of many Australians.

Looking at weekly sales data on realestate.com.au, Sydney, which currently allows in-person property inspections with one real estate agent and one buyer at a time, surprisingly hasn’t followed the expected declining trajectory seen in Melbourne during that city’s extended 2020 lockdown.

On the contrary, the data shows that one-on-one inspections have allowed a significant amount of housing market activity to continue, with the positive impact reverberating on people’s lives and the NSW economy. While sales activity in Sydney is down just under 15 per cent on the pre-lockdown level, Melbourne was down 50 per cent at a similar time in its lockdown last year.

Even more, telling is that without in-person property inspections currently in Melbourne, housing market activity has plummeted again. Six weeks after the start of the fifth lockdown in mid-July, weekly property sales are already down almost 35 per cent.

The number of property transactions in Melbourne now is following a similar trajectory to the city’s experience last year. After six weeks in 2020’s lockdown, sales had also fallen 30 per cent, and continued to fall to a level 70 per cent below the pre-lockdown rate of sales.

Buyers – understandably – do not want to make such significant financial commitments without viewing prospective properties in person. Sellers are holding off listing properties until physical viewings can restart. New listings in Melbourne fell 14 per cent in July, despite lockdowns only affecting the second half of the month.

While we expect the property market to recover swiftly once lockdown restrictions lift, as we saw in Melbourne last year, our analysis highlights that by allowing one-on-one property inspections in the meantime, transactions are still able to take place for those in need.

Many Australians are still returning home from overseas and need housing. Many more move each year for family and accessibility reasons. Financial strains over the past two years have been acute and moving allows some to access their life savings.

It is clear that the experience in Sydney with a small concession to lockdown restrictions makes the blanket ban in Melbourne difficult to justify. Sydney has shown that the housing market is able to operate at a level that can accommodate property transactions that are necessary, rather than discretionary, and do so safely. Subdued sales volumes are evidence of this, and as lockdowns continue, sales will continue to fall.

According to the Australian Bureau of Statistics, 1.4 per cent of people are directly employed as property operators or in real estate services. ABS data also shows that last financial year there was a 3.1 per cent increase in rental, hiring and real estate services businesses, which was the largest annual increase since the 2016-17 financial year, and up from 1.8 per cent growth in the 2019-20 financial year.

The number of property transactions in Melbourne now is following a similar trajectory to the city’s experience last year. Picture: Getty

Property transactions create work for the property industry directly, but for many others indirectly too; much of the finance industry exists to write mortgages, and conveyancers and mortgage brokers rely on these transactions for their earnings. Additionally, buying a property spurs other purchases, including removalist services, new furniture, white goods, electrical and even new cars.

Australia has surpassed the milestone of more than 50 per cent of people aged over 16 receiving the first dose of a vaccine and more than 30 per cent are now fully vaccinated. It is pleasing to see this rate continue to rise and protection within the community continue to grow. In recent weeks, the federal government confirmed reaching an inoculation rate of 80 per cent of the population is a key target to keep lockdowns at bay, and as such we need to bring to the forefront how we will live with this virus.

Allowing one-on-one property inspections is an absolutely necessary step in learning to live in a post-pandemic world, which includes the scenario where the virus remains active in the community. With robust hygiene measures in place, including social distancing, face masks, and QR code check-ins, the property industry through one-on-one inspections can support people in need of shelter, financial relief and the eventual resilience of the broader economy.

Owen Wilson is the chief executive officer of REA Group, publisher of realestate.com.au.

This article originally appeared in The Australian.