- Several property listings are available at a discount due to the coronavirus pandemic as agents worry on clearing their stock.
- Housing prices are expected to fall with Sydney and Melbourne estimated to witness a fall by up to 50%.
- Experts suggest buying a home now or relatively sooner rather than later if one has job security and financial viability.
- Property market scenario remains uncertain, contingent on the level of unemployment, consumer sentiment and economic recovery ahead.
2020 started on a positive note with many predicting a housing market boom due to a robust rebound of housing prices after the property market bottomed out during mid-2019.
However, the coronavirus pandemic and resulting business shutdowns have given a significant blow to the property market. There is a sharp increase in unemployment and a decline in wages at the moment. Also, the jobs market is anticipated to weaken further. A smaller amount of money with people would imply less money to bid up property prices and to bid up rentals.
The short-term rental market, including Airbnb, has disappeared due to border restrictions. COVID-19 has delayed the housing recovery due to weaker spending, reduced incomes, softer investment demand and bleak consumer sentiment, which is expected to persist in the months ahead.
Numerous temporary visa holders, after losing their respective jobs, had to head back home. Migration is anticipated to decrease dramatically over the next few years.
Australian Government has predicted about 85% fall in migration during 2020-21.
With about 60% of the growth in the property market dependent on immigration, short-term population growth will fall. But it should increase again once overseas migrants come back when border restrictions are eased. Continued population growth had been supporting Australia’s property markets. The oversupply of dwellings is now dwindling in many regions with very few vendors putting their properties for sale.
Discounted property listings amid COVID-19
Property prices for the houses up for sale in Australia were significantly reduced in April as agents worried about their piled listings due to coronavirus.
Dr Nicola Powell, Domain’s Senior Research Analyst, has revealed that Sydney has witnessed almost twice the proportion of live listings that had their prices discounted compared to the same period in 2019. She asserted that economic uncertainty, social distancing and fears regarding job security forced many sellers to drop their asking prices. However, she added that agents are making only small price adjustments on a wide variety of homes.
As per Domain data, an Australian digital property portal, 13.1% of live listings in Sydney had their prices discounted in April 2020 due to social distancing and auction bans compared to 6.7% in April 2019. Melbourne registered 10.7% of active listings discounted during the same period compared to 3.7% 12 months ago.
Dr Nicola also confirmed that the market had been impacted since mid-March. There was a decline in listings and clearances and an uptick in discounting.
Is it the appropriate time to buy a home?
Falling house prices does not mean they will be easier to buy, but there are cases of buying sooner rather than waiting to buy a house later. People with job security and sound financial background can go ahead in purchasing a property at prices that were highly unlikely weeks ago in big capital cities.
With falling interest rates to stimulate coronavirus affected economies, the cost of borrowing has become cheaper, implying affordable mortgages for those with sufficient finances. This can further encourage people to come into the market when lockdown measures have eased. However, experts suggest coronavirus is uncertain, and it remains essential to look into the specifics of the local and national market before buying a property there.
Eliza Owen, CoreLogic Head of Research, stated that the drop in property values has been moderate, but there are many other factors that must be considered. One must buy a house only if one has a steady income and is confident about future earnings.
Louis Christopher, SQM Research suggests that people who have the ability to buy a home can go ahead with buying. Still, the housing market can affect different people in different ways. However, he added that if he were to buy a home now, he would wait amid an environment of considerable uncertainty.
Experts predict a fall in house prices
Many experts are predicting that the house prices in some parts of the country can fall by as much as 50% as a massive economic downturn is expected to hit the whole world. The financial crash will have a significant effect on the property prices in Australia, and people with investments will struggle when the bubble bursts.
Harry Dent, Financial Commentator and US author, has forecasted that Australia’s most prominent property markets, i.e. Sydney and Melbourne could witness a drop in house prices by up to 50% while Brisbane and Adelaide’s market can fall by up to 40% and 30%, respectively.
Mr Dent also added that Australian banks that are substantially exposed to domestic real estate are going to get harmed when property prices go down even by 20%.
NAB Chief Economist, Alan Oster expects about 15% fall in house prices in the next year and flattening out from somewhere around mid-2021.
NAB Residential Property Survey index rises for Q1 2020, but confidence is shaken by the pandemic. NAB states that dwelling prices are expected to witness a significant drop over the next 12-18 months with property prices among major capital cities to fall by 10-15%.
Overall, the state of the property market depends on the duration of lockdown, level of unemployment, and consumer confidence along with the pace with which economy recovers.
There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.
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