Australia’s biggest housing markets could plunge by 20% as foreign student arrivals hit rock bottom

Westpac is forecasting a 20 per cent plunge in house prices this year in Australia’s biggest property markets as coronavirus sparks a recession.

More than 1.4million Chinese tourists last year visited Australia but border closures to slow the spread of COVID-19 have stopped a valuable revenue source. 

The worst global health pandemic in 100 years has also meant a temporary end to immigration and foreign students – a key source of rental income for landlords.

Westpac chief executive Peter King feared a property market recovery that began in mid-2019 would be unwound because of coronavirus.

‘House prices are expected to fall through the remainder of 2020, reversing the recent recoveries, particularly in Sydney and Melbourne,’ he told the Australian Securities Exchange on Monday. 

Since bottoming out in July 2019, Sydney’s median house prices has surged by 19 per cent from $864,993 to $1,026,418 last month, CoreLogic data showed.

This followed a record 17.6 per cent fall, after the market had peaked in November 2017, in response to an Australian Prudential Regulation Authority crackdown on investor and interest-only loans.

By comparison, Melbourne’s median house prices has surged by 16 per cent since bottoming out at $708,523 in May 2019.

Mid-point values for a detached home reached $819,611 in March 2020.

Prices in the Victorian capital fell 0.4 per cent in April, with Melbourne so far the worst-affected capital city housing market, the CoreLogic figures showed.

More than 1.4million Chinese tourists last year visited Australia but border closures to slow the spread of COVID-19 have stopped a valuable revenue source. Pictured is the Sydney Opera House with few visitors in March 2020 

Like Sydney, Melbourne also suffered from a sharp downturn between 2017 and 2019, with its median price falling by 15 per cent.

Starr Partners chief executive Doug Driscoll, who sells real estate in Sydney, said apartments were likely to take a bigger hit than houses as investors worried about the prospect of not having tenants.

‘If there is downward movement in prices, you will see that apartments in the inner city will come down slightly more than some of the houses in Sydney,’ he told Daily Mail Australia.

‘If we’re seeing in inverted commas a “rental crisis” – a lot of that is caused by students; if we have fewer overseas students, then there are few people to rent properties and that has an impact on vacancy rates.’

Mr Driscoll predicted the banks would be increasingly reluctant to lend to investors eyeing units near the city, with interest from potential landlords already falling.

‘That’s going to have an inevitable impact on their ability to borrow money as well,’ he said. 

‘We are already experiencing 60, 70 per cent less investors and when you see numbers of buyers drop away in any category, clearly that’s supply and demand and that has a roll-on effect to prices.’ 

Economists from all the major banks are forecasting a recession in 2020 as a result of the coronavirus shutdowns of non-essential businesses. 

A separate survey by the Australian Bureau of Statistics found 72 per cent of surveyed businesses expected COVID-19 to hurt their cash flows during the next two months. 

The ABS’s head of industry statistics John Shepherd said reduced demand for goods and services was expected to hurt 69 per cent of businesses during the same time frame, with 41 per cent of firms fearing they would have less ability to pay their bills.

Westpac chief executive Peter King feared a property market recovery that began in mid-2019 would be unwound because of coronavirus