Australian Property Market: Key Changes to Counter Pandemic Impact

The Daily Telegraph 24th March 2020 | 13 May 2024

What does COVID-19 mean for the Property Market?

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.
The Australian property market has been a hot topic lately, with people eager for news and updates. While some speculate about a possible crash, others are optimistic about its outlook in 2024.
Trends indicate steady growth, especially in Sydney, Melbourne, and Brisbane. Understanding capital gains tax and negative gearing can aid in smart property investment. Stay informed with reliable sources to navigate the dynamic Australian housing market effectively.
“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 percent respectively for the week ending March 22.

Australian Property Market: Key Changes to Counter Pandemic Impact

The Rametta family is among those taking their home to auction on the first weekend of social distancing requirements. Picture: Tim Carrafa

“This was despite continued changes to the COVID-19 situation, as well as people’s concerns about the economy. The enormous levels of stimulus are likely 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 percent and banks “ready to lend”. All this, she said, had “dramatically changed” her view as to the outlook of the property market.

Australian Property Market: Key Changes to Counter Pandemic Impact

Daniel Galea Harcourts Auctioneer elbows the highest bidder at an auction in Melbourne at the weekend. Picture: Tim Carrafa

What the Data Says

According to CoreLogic figures, Melbourne, Australia’s busiest auction market, had a preliminary auction clearance rate of 62.7 percent from 1317 properties last week, which was up from 55.1 percent from 814 homes in the same week this time last year.

Sydney recorded a 64.4 percent rate from 923 homes put under the hammer – that’s up from 52.1 percent from 506 auctions during the corresponding week in 2019.

In Brisbane, the clearance rate was weaker at 34.9 percent for 105 listings, however, it was still an improvement in 2019 when the same week saw a 28.2 percent clearance.

In fact, despite the escalating health crisis and economic fallout related to coronavirus, the week that 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 percent 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-shutdown version of Australia where there was more confidence in the economy and jobs. Sydney saw a 1.5 percent rise over the past four weeks while Melbourne moved up slightly with a 0.8 percent gain and Brisbane’s change was minimal at 0.5 percent.

Australian Property Market: Key Changes to Counter Pandemic Impact

REA chief economist Nerida Conisbee.

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.

The Australian Property Market remains dynamic, with fluctuating trends across major cities like Perth, Melbourne, and Brisbane. Amidst concerns of a housing crisis and debates over bubble speculation, it’s crucial to monitor factors like interest rates and demographic shifts.

Understanding rental yields, vacancy rates, and affordable housing options is essential for both buyers and sellers. Additionally, keeping an eye on auction clearance rates and first-home buyer opportunities can offer valuable insights into the market’s trajectory.

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 minimize 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.”

Australian Property Market: Key Changes to Counter Pandemic Impact

Postponed dwelling purchases may be a likely option.

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 recognize 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

Published By – The Daily Telegraph

Kristen Craze