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Real estate industry feels pinch as sales dry up

Business

House sales in March were down by more than 100 on last year with potential buyers showing caution as COVID-19 restrictions were put in place. And the Real Estate Institute of South Australia says initial surveys are showing April sales are only at half their usual numbers as confidence in the market evaporates.

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Data compiled by accountancy firm BDO in conjunction with the Real Estate Institute of South Australia (REISA) shows there were 1321 sales agreements signed in March, down from 1428 the previous year. Sales were also down in January and February on last year, resulting in a 6.7 per cent drop to 4180 for the March quarter.

Restrictions that have required auctions and open inspections to be conducted online have hampered the industry. Combined with economic uncertainty, the restrictions have resulted in a dramatic fall in listings and sales.

REISA President Brett Roenfeldt said most agents had a reasonable March for sales and listings. with the market easing in the last week of that month as confidence began to wane.

He said REISA had done two surveys of its members this month with the most recent one showing that sales and listings had dropped on average about 50 per cent in April.

However, he said prices had remained steady because the number of listings had declined fairly proportionately to the number of buyers in the market.

“The only reason the prices are holding quite well is because of that age-old thing of supply and demand,” Roenfeldt said.

“The people in the market at the moment are serious players – they need to sell or they need to buy.

“As we move out of April and go into May I think we will see even more vendors making the decision not to put their properties on the market and so those listings will drop even further.

“The current 50 per cent reduction in sales and listings will continue to trend down to 60 or 70 per cent into May and then we’ll find a bottoming out at around that 60 or 70 per cent and it will sit there and then slowly we’ll start to move out of it as the isolation restrictions begin to ease.”

The REI Forms report showed the number of rental agreements signed in March across the state rose to 3252 – an increase of 7 per cent on March 2019.

It also showed median rents across the state increased by $10 to $350 per week on the March 2019 figure.

Of the suburbs where more than 10 rental agreements were signed for the quarter, Henley Beach South (up $127 to $630 per week) and Vale Park (up $85 to $500 per week) had the strongest growth.

Roenfeldt said the increase in March rentals was a result of people deciding to rent rather than buy a home.

“There’s going to be a certain percentage of people who wanted to buy a property and all of a sudden they’ve lost their job or their hours have been substantially reduced so they’ve decided not to buy a home and are renting instead.”

Winter is traditionally the quietest season for the real estate industry with spring the busiest.

Roenfeldt said Federal Government incentives such as the JobKeeper subsidy had been very beneficial to the industry but the downturn had led to some real estate businesses reducing administration and sales staff numbers.

He said real estate businesses that had property management arms and a strong book of rental properties were much better placed to ride out the downturn.

“There are still plenty of real estate businesses that don’t have any rent roll at all and those are the ones that would be hurting the most in this current climate because they are simply relying on sales and that’s substantially down, whereas with the property managers, as long as tenants are paying rent, then that flow through is still happening.

“But property managers are under phenomenal pressure from landlords and tenants negotiating hardship cases.

“From what I’ve seen the industry has coped very well with the changes that have had to be implemented, especially when it comes to private inspections and that’s been great. But obviously, none of us want this COVID-19 thing continuing for the rest of the year.

“The quicker we can get out of this the better because there are an enormous amount of businesses that are hurting.”

The State Government announced on Friday a $50 million land tax relief package for residential and commercial landlords, offering a 25 per cent reduction on their 2019-20 land tax liability on affected properties.

REISA last week sent a submission to Premier Steven Marshall calling for assistance.

It included a request for stamp duty relief for six months and incentives for first home buyers looking to purchase established properties.

“In essence, the real estate industry produces billions of dollars of income in South Australia, whether that be stamp duty, GST or the flow-on effects from many other industries so the government would certainly be feeling that lack of income coming through at the moment, it would be significant,” Roenfeldt said.

“There’s got to be some incentives to kickstart the real estate industry in South Australia to get it moving because the quicker the industry starts moving the more money comes through the system.”

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