The Australian property market is continuing to take a significant hit as the impact of the coronavirus epidemic seeps into all sector of the economy.
Both the sales and rentals sectors have declined sharply, with economist predicting that the sudden halt in immigration, which has traditionally boosted property market demand, will further exacerbate the problem.
The Guardian reports that figures released by the University of New South Wales and Frontier SI indicate an 85% drop in sales values in Melbourne over the past eight weeks and a 79% decline in Sydney.
Auction sales and consumer buying confidence plummet
Data from the same source shows that the value of property auction sales had declined by an average of 35% by mid-April. Adelaide has been particularly heavily impacted, with a drop of 83%. Brisbane went down 67% and Canberra 65%.
Westpac added to the gloom on Tuesday 28 April when it said its balance sheet had taken a $1.6-billion hit from customers who were finding it difficult to meet their loan repayments. This ties in with data released by the bank in mid-April, which showed that consumer sentiment around the buying of property had experienced its biggest monthly decline since measurement began 47 years ago.
Rental market has also been hit
Unsurprisingly, the rental market has also been caught up in the turmoil.
Information from SQM research indicates that Sydney rental prices dropped 5.2% in the past month, with certain highly desirable areas reducing by between 10% and 17%. In Melbourne the monthly decline was 2.6%
The president of the Property Owners Association of NSW, John Gilmovich, told The Guardian: “Some tenants have just bailed out. They’ve broken their leases and handed back the keys saying they just can’t pay. Others have seen their leases expire and not renewed. The under-40s especially are moving back to live with mum and dad.”
How will this unfold and is there light ahead?
Leith van Onselen, chief economist at the MB Fund and MB Super, believes much will depend on how long the COVID-19 lockdown persists and whether Australia experiences a secondary wave of infections causing further shutdowns.
“Being an illiquid consumption good means that housing values are tied heavily to the fundamentals of employment and income. The worse these are impacted, the worse housing values will be as well,” he observes.
“A genuine property crash could arise if there are widespread business closures, creating mass unemployment for an extended period. This would likely generate large numbers of forced sales and failed settlements, resulting in a potential 20% to 30% ‘crash’ in Australian dwelling values.”
But perhaps all is not doom and gloom. Steve Jovcevski, a property analyst at Mozo.com, agrees that prices have fallen, but says they could pick up again later in the year, helped by the banks allowing homeowners to defer mortgage payments.
“I’m pretty positive because it could have been worse and I’m just getting more confident that we will get over it sooner rather than later. There’ll be a dip now but it will bounce back,” he told The Guardian.
Domain economist Trent Wiltshire points out that not everyone has been impacted and they could see it as a buyers’ market, which would begin boosting sales again. “A decent part of the population who have stable income might think it’s a good time to buy in three to six months’ time,” he said. “This shock is quite uneven. Not everyone is negatively affected.”