How will COVID-19 impact housing prices in the next 3, 6 and 12 months?

Our chief property economist's predictions

Whether you’re a first home buyer, or planning to upsize, downsize or invest, the COVID-19 coronavirus will have cast a grey cloud of uncertainty over those beautifully curated plans right now.

WATCH: Australia’s most expensive suburb is not in Sydney or Melbourne

So what should you do? Chief economist Dr Diaswati Mardiasmo heads up the National Research Department at PRD, monitoring property trends across Australia. Here, she shares his expert advice..

How is COVID-19 impacting the Australian property market? 

“We are not yet seeing a dramatic impact on the property market due to COVID-19, mainly due to a few reasons:

  • The RBA cutting the cash rate twice in March 2020 (as a response to the economic impact of COVID-19) and many banks taking the initiative to pass on these savings and/or coming up with their own policy that assists with home loan mortgages.
  • Some banks (the big 4) are allowing mortgage relief, such as: ‘freezing’ mortgage repayments for 6 months, offering a new low fixed rate home loans or refinancing, extending out the mortgage term (time) without penalty.
  • Investors opting to invest into the property market, which is less volatile than the share market.
  • The AUD is low, which means our properties are now more affordable/accessible to those from overseas.
  • Government financial stimulus packages, which is allowing people to access some funds to tie them over in the short term.
  • Real estate agents being more savvy in the marketplace and using all manners of technology to allow them to do business. This includes augmented reality videos, virtual reality videos/inspections, online auctions, etc.

Is the coronavirus COVID-19 like anything we’ve seen impact society and the market previously?

“In comparison to other outbreaks, for example SARS in 2003, I believe that, based on the swiftness of government + RBA + Bank’s responses, that we are in a better place to ride out COVID-19.

“When SARS happened there was a slowing in our property market, as China’s output growth slowed down for a few months, but then it bounced right back up once the outbreak was controlled and economic stimulus introduced.

In Hong Kong, for example, for their large housing estates, the average price decline is 1 to 3 per cent for the average SARS-affected estate, and 1.6 per cent for all other estates. In our property market there was a slowing in transaction numbers, however prices continue to increase (albeit at a slower pace) well into 2005.

Our property prices didn’t suffer major setbacks in the midst of Swine Flu in 2009/2010. It stabilised and there were little positive growth, however the swine flu happened in between the GFC 2008/2009 and the mining downturn 2011/2012, so there were other economic downturns that impacted unemployment and housing activity.

With COVID-19 we are not even waiting until a few months for the release of economic stimulus, we are already on it. COVID-19 may feel more ‘extreme’ due to the swiftness of the virus’s infected cases in Australia, lockdown of many countries, requests of self-isolation and cancellation of many large events, and restrictions on business operations (particularly small businesses). However, at the same time there are economic stimuluses being swiftly introduced to assist during these trying times and there has been a massive advancements in technology (compared to 2003 and 2009), that allow many businesses to innovate their ways to do business.

What woudl you say to buyers? 

“From a property market perspective, for those ready to buy, more than ever now is the best time – especially with record low cash rate, lenient lending, and many banks offering deals.”

Can you explain the recent property trends in Australia? 

“We have to remember that Australia is not ‘one’ housing market – there are many micro-markets, for example the market in regional Australia would be different to capital city, just as the market in Brisbane would be different to a tourist heavy region such as Broome or Whitsundays.

 Therefore there is a strong dependence on the economic-make up of individual cities, and thus COVID-19 impacts different places in a different way. A city that has a higher number of casual employees or small businesses or one major industry, for example, will be impacted differently to a major capital city like Sydney.

How do you foresee the housing market trend playing out?

 “The answer to this really depends on how long COVID-19 will last, as one of the biggest impacts of COVID-19 is in consumer confidence. If it is a six months event (or less), with all of the offerings/stimulus from government + RBA + banks, there is enough to tie us over. And I am sure that there will be more measures introduced if it goes beyond six months.

What’s your trend forecast for the next:

3 months 

“We might see some reduction in real estate activity, as the industry get used to ‘the new way of doing business’ and to those impacted (in terms of unemployment/income loss) being able to access government stimulus.

However, this is balanced by smart buyers taking advantage of less competition in the market and historical low interest rates.”

6 months

“Depending on where we are with coronavirus, if it is contained and we are seeing some normality in commercial activity we will start to see an increase in consumer confidence.”

12 months

“Again, depending on where we are with coronavirus, but with the assumption that the virus is contained (it’s a long enough timeframe) and commercial activity is back on track, we will see a surge in consumer confidence. This has a multiplier effect on the property market in terms of people buying and investing.”

Is there a danger in making predictions this early?

“One of the key things about property trend is that looking at it from a month by month basis will always result in more volatile shifts, as the economy and society adjusts and adapt to particular events. At the moment there is something new announced by the government every couple of days, therefore it is a ‘wait and see’ situation, while keeping business as normal as possible.”

How will the government policies and how these will impact the market?  

“There has been a multitude of government financial stimulus released to the market, and also restriction policies; released in a tidal wave sort of format. The speed and occurrence of these announcements can cause confusion and panic within the society, which may have some impact on the property market – in terms of how things will go, if the economy is going to crash, what can people can or can not do, etc. However it is crucial that at times like this we do not overreact, and go through available stimulus’and policies in a thorough manner, to ensure that we are still supporting the economy as a whole.”

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