- Property market in Australia has been impacted by the spread of the COVID-19, and the restrictions on economic activities.
- The impact of COVID-19 was seen on the lending commitments starting from February 2020.
- Stability in the property market of Australia to some extent depends on how early a vaccine can be developed, and things get back to normal.
If there is one thing that one can be sure of in the Australian housing market, it is the volatility in the property prices from time to time.
Changes in Residential Property Prices
The residential property prices rose by 3.9 per cent in December 2019 quarter driven by the rise in prices for Sydney and Melbourne. The prices of residential properties rose by 5.5 per cent in Melbourne and 5.2 per cent in Sydney. Moreover, with the rise in property prices for December quarter, the increase in residential property prices for the year to the December quarter 2019 was 2.5 per cent, as per the date by ABS (Australian Bureau of Statistics).
The results for the December quarter have been in line with the other housing market indicators, comprising the rise in new lending commitments to households and sales transactions over several months.
The trend of rising property prices was evident in March 2020 quarter as well, where Residential property prices rose by 1.6 per cent, which was much lower as compared to the rise during December quarter.
In March 2020 quarter, Australia's two largest cities, Sydney and Melbourne, led the rises with gains of 2.6 per cent and 2.3 per cent, respectively. The surge in the prices for the quarter was in line with the anticipations, said Chief Economist of the Australian Bureau of Statistics, Bruce Hockman.
New Loan Commitments Impacted by COVID-19
After the outbreak of COVID-19, the property market was said to be amongst the most impacted sectors of the Australian economy as the economic activity lost pace and volatility in the market, which is expected to remain for some time.
Rising by 4.4 per cent in December 2019, the value of new loan commitments for housing saw a further upside of 4.6 per cent in January 2020, growing at the fastest rate since the turning point in lending activity in mid-2019 as per ABS Chief.
However, the same fell by 1.7% in February, in seasonally adjusted terms, following a considerable growth in the series from mid-2019 onwards. During the month, new loan commitments for both investor housing as well as owner-occupier housing went down, declining 1.9% and 1.7%, respectively.
Moreover, the impact of COVID-19 on fresh lending commitments began to reflect from the starting of February 2020 when there were a relatively smaller number of confirmed cases of COVID-19 within Australia and before it was acknowledged as a pandemic across the globe.
In addition to this, clinical and economic restrictions due to COVID-19 were placed in late March and could not drive significant impact on the property prices in the March quarter of the year 2020.
HIA’s Forecast Decline In Housing Starts in NSW
In light of the COVID-19 pandemic, the Housing Industry Association (HIA) in the month of May forecasted housing starts in New South Wales to decline by 27.5% during the current financial year and a further decline of 34.1% in 2020-21. Moreover, since the introduction of the COVID-19 restrictions, sales for a new home have declined in each of the three months with a reduction in the volume of work on the ground.
Several changing trends are also likely to impact the property prices in Australia and the occupancy of the existing infrastructure as well as the demand for new residential and commercial properties.
Changing Trends that Could Impact Property Market
With the changing times and need of the hour, businesses have adapted to new and innovative methods of getting the work done like working from home and remote locations. Several organisations have completely shifted work from workplaces to the homes of its employees. Employers now need less space to get the same amount of work done. Moreover, businesses are considering cutting costs which may result in companies letting go off vast spaces for the ores, and many workplaces are moving to smaller places.
In addition to this, several retailers are willing to move towards online platforms and shut retail stores, and many are looking forward to operating only a few physical stores. Due to a halt in the economic activities, businesses are developing and employing fresh approaches to decrease the cost incurred during COVID-19 scenario.
In addition to cutting the cost, retailers are also shutting down stores as there is huge uncertainty regarding the duration of the disease. The spread of the virus is having a massive toll on the footfall at the stores. Although anxiety was seen in markets across some parts of the world as restrictions were relaxed; however, a significant number of people are considering buying online.
The COVID-19 scenario is proving to be a real situation changer for retailers to move to online ways of selling aggressively. However, leaving empty retail spaces might impact the property market in Australia.
Although the government had announced a stimulus package for the Australian housing market; however, a lot of questions remained unanswered regarding the duration of the disease and return of the economic activities to normal levels.
After all this, there are fears of the second wave of COVID-19 infections as fresh cases emerged in Beijing and New Zealand. If this happens in Australia as well, that too at a time when economic activities are yet to gain complete momentum, it could hurt the investors and other stakeholders in the property market.
As nothing is certain as of now and scenario is expected to change significantly after a successful breakthrough in the vaccine development, more volatility can be expected in the property market of Australia for now. Moreover, viewing the uncertain scenario, there can be a delay in getting back the stability in the market.