In 2020, the average time to sell a retirement village home continued to grow, reaching 258 days. However, the stumbling block of the time it takes to sell the family home must be dissipating, given the heat in the residential sales market.
CoreLogic reports its national home value index recorded a 2.8% rise in March, the fastest rate of appreciation since October 1988 (3.2%). See chart above.
They also report the growth is strong across the country, including regional areas, with home prices increasing by at least 1.4% everywhere.
They say Sydney led the pack for capital gains in March, with values surging 3.7% over the month and 6.7% higher over the first quarter of the year.
CoreLogic’s research director, Tim Lawless, says the last time Sydney housing values recorded a quarterly trend this strong was in June/July 2015.
Meanwhile, the CEOs of the Commonwealth Bank and National Bank told the Financial Review that they expect 10% growth in home prices across the next 12 months.
ANZ Bank CEO, Shayne Elliott, told the House of Representatives inquiry on Friday that Australia is looking at the best economic conditions in six years. Business confidence has rebounded to pre-COVID levels and consumers are spending.
This is all good news, but scratch the surface and there is a slightly different dynamic occurring.
Eye-watering growth makes headlines, but they don’t take into account price drops.
Most large operators have a benchmark to increase prices by 3.5% a year – which sounds low compared to the action with national housing prices over the past 12 months. Surely buyers can afford more, given they are selling in a rising market.
However, as the ABS graph below shows, the actual value of dwelling stock grew from $6.950 trillion to $7.725 trillion, which is 11% over the three years or an average of 3.7% a year (not compound).
So, 3.5% sale price growth is on the money, given the drop in values in 2019.
Strong marketers will however champion the post-COVID village benefits that should deliver a premium to operator pricing. This is being seen by village operators that have generated waiting lists.
If your village home is valued at $450,000 and you can achieve a 1% premium increase in price, this delivers $4,500 extra profit (with no capital gain share). Ten sales and $45,000 warrants an extra investment in marketing.