Australian house prices in capital cities big and small are expected to suffer double-digit falls in coming months as coronavirus lockdowns cause unemployment to reach Great Depression levels.
A survey of 25 economists by financial comparison website Finder predicted sharp drops in every state and territory, with a majority of the experts declaring now was not the time to buy property.
Sydney was expected to suffer a 10.2 per cent slide – slicing $104,695 off the median house price back to $921,723, based on CoreLogic’s April data.
Australian house prices in capital cities big and small are expected to suffer double-digit falls. Hobart was expected to be the worst-hit city with the experts forecasting a 10.5 per cent drop, which would see prices plunge by $53,832 to $458,855, hitting levels last seen in 2018. Pictured is a Berriedale house in the city’s north
However it was Hobart that was expected to take the biggest hit in percentage terms, with a forecast 10.5 per cent drop reducing values by $53,832 to $458,855, wiping out gains made since 2018.
The Tasmanian capital was, until early 2019, Australia’s best performing property market with Victorians in particular seeking a cheaper alternative to Melbourne.
International students had buoyed demand for rental accommodation and thereby investment properties, but border closures and fears of a student exodus are expected to hurt demand.
House price carnage
Sydney: DOWN 10.2 per cent to $921,723
Melbourne: DOWN 9.2 per cent to $743,476
Brisbane: DOWN 8.4 per cent to $511,469
Perth: DOWN 8.3 per cent to $426,883
Adelaide: DOWN 8.1 per cent to $437,673
Hobart: DOWN 10.5 per cent to $458,855
Darwin: DOWN 9.5 per cent to $428,956
Canberra: DOWN 6.4 per cent to $657,878
Source: The average prediction of 25 economists surveyed by Finder. Final numbers are based on subtractions to CoreLogic’s median house prices for April
Melbourne was forecast to suffer a 9.2 per cent decline, which would see mid-point house prices fall $75,330 to $743,476.
Brisbane was also predicted to be hit, with median property prices dropping 8.4 per cent, or $46,903, to $511,469.
Perth was forecast to suffer a 8.3 per cent slump, in a city already hit by several years of decline since the end of the mining boom, which would see house values drop $38,638 to $426,883.
Adelaide was expected to cop a 8.1 per cent drop, causing prices to slip by $38,576 to $437,673.
Darwin was in particular danger, with median values tipped to fall 9.5 per cent or $45,028 to $428,956 in a city where the Northern Territory government is the major employer.
Canberra, Australia’s capital and the home of federal bureaucrats who have been largely insulated from job and wage cuts, was expected to suffer the least severe decline of 6.4 per cent.
Even so, that would still see median house prices fall by $44,983 to $657,878.
The Finder survey found 58 per cent of economists declared now was not the time to buy a house, and those seeking a home should wait for the market to reach its bottom next year.
Sydney was expected to suffer a 10.2 per cent slide, which would see median house prices fall $104,695, back below $1million, to $921,723, based on CoreLogic’s April data. Pictured are units at Cronulla in the city’s south
The group’s online consumer sentiment tracker survey of 8,146 people also showed just 42 per cent of respondents in April believed now was the time to buy a home, a sharp drop from 60 per cent in July 2019, which followed the end of a two-year property market downturn.
How COVID-19 has affected house prices
Melbourne: DOWN 0.4 per cent to $818,806
Sydney: UP 0.3 per cent to $1,026,418
Brisbane: UP 0.3 per cent to $558,372
Adelaide: UP 0.4 per cent to $476,249
Perth: UP 0.3 per cent to $465,521
Hobart: DOWN 0.2 per cent to $512,688
Darwin: UP 1.1 per cent to $473,984
Canberra: UP 0.1 per cent to $702,861
Source: CoreLogic Home Value Index for April based on median house price changes
The economic downturn has discouraged Australians from putting their home on the market.
While vendors will get lower prices, they have greater chance of selling in the current market due to the lack of options for buyers.
CoreLogic reported auction clearance rates in capital city averaged above 60 per cent for the first time since late March.
In Sydney, it was 70.8 per cent, following the lifting of bans on open home inspections and public auctions.
Finder’s insights manager Graham Cooke said prospective home buyers and sellers were rightly worried about how rising unemployment would reduce the number of buyers in the hurt real estate market, and might also cause some discount selling as people had to liquidate wealth.
‘Both house hunter and seller demand has weakened in the last month as Australians hunker down to help stop the spread of coronavirus,’ he said.
A fall in real estate values also creates a situation known as negative equity where borrowers owes more than their home is worth, with many taking out mortgages for almost the entire value of the residence.
‘While falling house prices is great news for potential buyers, it poses no relief for current owners who will not see their outstanding loan amounts drop,’ Mr Cooke said.
Melbourne was expected to suffer a 9.2 per cent decline, which would see mid-point house prices fall $75,330 to $743,476. Pictured are people on the banks of the Yarra River
Almost half, or 45 per cent, of the economists surveyed by Finder expected Australia’s jobless rate to double from 5.2 per cent in March, before the COVID-19 shutdowns, to 10 per cent in 2020.
Apartments weather coronavirus crisis so far
Sydney: UP 0.6 per cent to $777,940
Melbourne: UP 0.1 per cent to $588,204
Brisbane: UP 0.5 per cent to $388,729
Adelaide: UP 0.7 per cent to $334,240
Perth: DOWN 0.2 per cent to $359,306
Hobart: UP 0.5 per cent to $404,021
Darwin: UP 3.1 per cent to $286,248
Canberra: DOWN 0.4 per cent to $445,169
Source: CoreLogic Home Value Index showing movements in median apartment prices in April
This forecast was in line with the Reserve Bank of Australia and Treasury, which both saw unemployment hitting double-digit figures for the first time since early 1994.
A small proportion, or three per cent, of the economists surveyed by Finder forecast an 18 per cent jobless rate, a level of unemployment unseen since the 1930s Great Depression.
A sizable minority, or 15 per cent, of the economists saw Australia having a jobless rate of at least 12 per cent – levels not experienced for more than 80 years.
The Finder survey on real estate was even more pessimistic than a National Australia Bank forecast last week of Sydney house prices falling by 6.5 per cent by 2021 as apartment values fell by 12.8 per cent.
NAB also forecast an 8.4 per cent decline in Melbourne house prices as apartment values crashed by 14 per cent.
Canberra, Australia’s capital and the home of federal public servants, was expected to suffer the least severe decline of 6.4 per cent. Even so, that would still see median house prices fall by $44,983 to $657,878. Pictured are apartments on Constitution Avenue
Westpac chief executive Peter King last week feared a house price recovery that began less than a year ago would be unwound – leading to falls of close to 20 per cent in Australia’s biggest cities.
Since bottoming out in July 2019, Sydney’s median house price 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 mid-2017, in response to an Australian Prudential Regulation Authority crackdown on investor and interest-only loans.
By comparison, Melbourne’s median house price has grown 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.
The Finder survey on real estate was even more pessimistic than a National Australia Bank forecast last week of Sydney house prices fall by 6.5 per cent by 2021 as apartment values fell by 12.8 per cent. NAB also forecast an 8.4 per cent decline in Melbourne house prices as apartment values crashed by 14 per cent