Despite the escalating health crisis and related economic fallout, the weekend experienced the second busiest for auction activity to date this year. Figures show that 2,539 homes were taken to auction across Australia’s combined capital cities.

The property market is indeed feeling the impact of coronavirus restrictions, influencing real estate market trends. With social distancing measures in place, traditional open houses are being replaced by virtual tours to accommodate buyer demand while ensuring safety.

However, this shift hasn’t eliminated concerns about a potential housing market crash. Property investment strategies are adapting, keeping a close eye on mortgage rates and seller activity while navigating uncertain times.

The preliminary auction clearance rate of 61.3 percent is up on a year ago when home values were falling, but the impact of COVID-19 has begun to be felt.

CoreLogic described this week’s preliminary auction results as “marking a turning point in buyer and seller sentiment”, with withdrawal rates rising and vendors thinking twice about testing the market as buyers lose confidence or choose to avoid public gatherings.

Corelogic says it’s likely that the preliminary auction clearance rate of 61.3 percent will be revised down to below 60 percent for the first time since mid-2019 as remaining results are collected.

In comparison, the previous week saw 2,274 homes taken to auction returning a preliminary auction clearance rate of 70.6 percent, before revising down to a final clearance rate of 65.3 percent.

To date, CoreLogic says there is no evidence of “reduced housing values”, although notes that it is clear, transactional activity will be temporarily disrupted in the coming weeks and months.

“The extent of this disruption depends on how long it takes to contain the virus and for sentiment to recover,” the data house notes.

Housing Values

Speaking on the housing market, AMP economist Shane Oliver said that if the recession should last more than six months – with unemployment up to 10 percent or more, house prices could collapse by up to 20 percent in a worst-case scenario.

The property market is indeed feeling the impact of coronavirus restrictions, causing concerns about its long-term stability. With the economic impact of coronavirus looming large, governments have implemented stimulus packages to alleviate the strain.

This has offered relief to first-time home buyers, but the rental market faces challenges with eviction moratoriums in place. Property valuations are fluctuating, raising concerns about foreclosures. However, post-pandemic recovery may see property emerge as a haven asset.

While social distancing is likely to delay property transactions, Oliver said AMP’s base case is for a rise in unemployment to around 7.5 percent.

“This is likely to drive a 5 percent or so dip in prices ahead of a property market recovery into next year as the economy bounces back and pent-up demand is unleashed again helped by ultra-low interest rates,” Oliver said.

On Friday, the federal budget was postponed until October, as Scott Morrison outlined that the pandemic is likely to remain a problem for at least six months.

Morrison’s $66 billion stimulus package, announced Sunday, dwarves the initial $17.5 billion economic stimulus package announced eleven days ago, in a bid to “cushion the economy” as Australia goes into social shutdown.

The measures follow the Reserve Bank of Australia’s emergency cash rate cut to 0.25 percent last week.

Rent Relief Model During Covid-19

Canberra has also announced that both commercial and residential tenants struggling to pay rent would receive assistance as part of the coronavirus stimulus package.

“To ensure that in hardship conditions, there would be relief that would be available, and ensuring that tenancy legislation is protecting those tenants over the next six months at least,” Morrison said on Friday.

“Everyone does have that role to play, and that will include landlords for people who are enduring real hardship.”

Morrison said that this work will be done by states and territories.

“And that work will be led by Western Australia, together with New South Wales, working with all other states and territories, to bring back some model to be applied in hardship cases.”