Every day is changing in the wake of coronavirus and it is becoming clear that the property market will not be immune, but just how the real estate world will be affected remains to be seen in the data.
“Conditions are changing day to day and it is uncertain whether auctions will take place in the traditional sense this weekend,” said REA Group’s chief economist Nerida Conisbee, who added that sentiment appeared to remain high according to their numbers. REA Group reported that the clearance rates in Victoria and NSW were 67 and 70 per cent respectively for the week ending March 22.
“This was despite continued changes to the COVID-19 situation, as well as people’s concerns about the economy. It is likely that the enormous levels of stimulus is helping the property market, keeping it more stable than some other sectors,” she said.
Ms Conisbee also pointed out that although we may be going through a health crisis, there is no shortage of money with interest rates now sitting at 0.25 per cent and banks “ready to lend”. All this, she said, had “dramatically changed” her view as to the outlook of the property market.
What the data says
According to CoreLogic figures, Melbourne, Australia’s busiest auction market, had a preliminary auction clearance rate of 62.7 per cent from 1317 properties last week, which was up from 55.1 per cent from 814 homes in the same week this time last year.
Sydney recorded a 64.4 per cent rate from 923 homes put under the hammer – that’s up from 52.1 per cent from 506 auctions during the corresponding week in 2019.
In Brisbane, the clearance rate was weaker at 34.9 per cent for 105 listings, however is was still an improvement on 2019 when the same week saw a 28.2 per cent clearance.
In fact, despite the escalating health crisis and economic fallout related to coronavirus, the week that was just happened to be the second-busiest for auction activity so far this year. CoreLogic counted 2539 homes taken to auction across the combined capital cities, returning a preliminary national auction clearance rate of 61.3 per cent which is substantially higher than a year ago when values were falling.
Property values appear to be holding their own over the past 28 days. Although the month’s figures show a snapshot of a market that was well aware of coronavirus, the data reflects a pre-shut down version of Australia where there was more confidence in the economy and jobs. Sydney saw a 1.5 per cent rise over the past four weeks while Melbourne moved up slightly with a 0.8 per cent gain and Brisbane’s change was minimal at 0.5 per cent.
What happens next
Ms Conisbee added that although clearance rates aren’t always the best indicator of the market (as they primarily reflect the top end in Melbourne and Sydney), we would need to have to wait for solid search activity trends and pricing data before we could see how Australian property is faring amid COVID-19.
She said while the first round of the Government’s stimulus didn’t have a direct impact on property, it would support the economy therefore assisting the property market indirectly.
“At this stage, the biggest risk to property is rising unemployment and an increase in distressed sales.
The stimulus packages are making home loans cheaper, but will ideally minimise people becoming unemployed.
The border shutdown will impact foreign purchasers of Australian property and is likely to have some impact on the new homes market, however, offshore buyers have been a small component of the market since 2017,” she said in her summary.
“While there are a lot of people watching for prices to fall dramatically so that they can grab a bargain, at this stage, I don’t believe that will happen.”
The short to long term story
Eliza Owen, head of Australian research with CoreLogic said while sales activity was likely to decline, what the actual impact on values would be is still unknown territory.
“In the short term, the coronavirus and subsequent share market declines have already had a significant impact on consumer confidence.
“This may lead to postponed dwelling purchases, as housing is an expensive, high commitment purchase decision,” she said.
“In the long term, housing market values and activity will be linked to the extent that quarantine measures affect income, employment, borrowing capacity and credit availability,” she added.
Ms Owen stressed that it is important to recognise that Australia does not have just “one” housing market, but many micro markets.
“Given the idiosyncrasies of the current downturn, there are likely to be parts of Australia where housing demand, including rental demand, will fall more sharply than others.
“These include areas where workers cannot perform their jobs remotely, and may have to sacrifice income if social distancing is enforced, where there is a high incidence of casual employment, and where there is a high concentration of employment in affected industries,” she added
Originally published as What happens next for our housing market.
Credit: News.com.au
