The coronavirus crisis is unlikely to make real estate affordable for young, first-home buyers despite predictions of double-digit price falls, experts say.
Capital city auction clearance rates in Australia’s biggest cities have also doubled to more than 70 per cent in only a month, as fewer property owners put their home on the market.
In Sydney, just 1.4 per cent of home sales in May were forced or urgent, the same level as February before the COVID-19 lockdowns, property sales website Domain has revealed.
In Melbourne the figure stood at 0.5 per cent, also unchanged from February, while in Brisbane the proportion of distressed sales in fact fell from three per cent to 2.8 per cent.
The coronavirus crisis would be unlikely to make real estate affordable for young, first-home buyers despite predictions of double-digit price falls, experts say. Pictured are prospective home buyers in Brisbane after COVID-19 restrictions were eased on open home inspections
The Canberra suburbs of Gungahlin and Tuggernanong had no urgent sales in a city with an overall 0.6 per cent distress rate.
While tourist-dependent places like the Gold Coast have a higher rate of distressed sales, at 5.5 per cent, Domain senior research analyst Nicola Powell said very few home owners were being forced to sell their property.
‘There is little evidence to suggest an increase in urgent or distressed selling across Australia’s capital cities,’ she said.
CoreLogic real estate sales data showed the proportion of homes on the market was 25 per cent weaker compared with a year earlier.
Tim Lawless, CoreLogic’s head of research, said this was more likely a sign of distressed sales being at low levels.
‘In other words, not many people are selling, because not many people have to sell,’ he said in an analysis piece for the Property Update website.
In Sydney, just 1.4 per cent of home sales in May were forced or urgent, the same level as February before the COVID-19 lockdowns, property sales website Domain has revealed. Pictured is a house at Toongabbie in Sydney’s west
Home owners, who could service their mortgage or owned their home outright, were more likely to delay selling their home until the economy recovered.
Distressed sales rates
Sydney: 1.4 per cent
Melbourne: 0.5 per cent
Brisbane: 2.8 per cent
Perth: 2.3 per cent
Adelaide: 1.0 per cent
Canberra: 0.6 per cent
Darwin: 2.8 per cent
Hobart: 1.0 per cent
Source: Domain report on urgent home selling for May 2020 by Dr Nicola Powell
‘Due to the temporal nature of the COVID-19 downturn, vendors may hold high expectations for their property value and simply hold off selling until the economy returns to full-scale production,’ Mr Lawless said.
A surge in Australia’s unemployment rate, as part of the worst global economic crisis since the 1930s Great Depression, would be unlikely to cause real estate values to plummet.
‘Negative economic shocks do not necessarily lead to severe declines in property prices,’ he said.
He also predicted house and apartment prices would remain much more resilient than the share market, which plummeted by 38 per cent from its peak on February 20 to the low point on March 23.
The benchmark S&P/ASX200 on the Australian Securities Exchange has since recovered from those lows and was last week 22 per cent below its all-time high.
CoreLogic real estate sales data showed the proportion of homes on the market was 25 per cent weaker compared with a year earlier. Tim Lawless, CoreLogic’s head of research, said this was more likely a sign of distressed sales being at low levels. Pictured are homes in Sydney’s west
‘Property does not see the same declines as shares during a downturn, because it is used to live in and therefore not as speculated upon as shares,’ Mr Lawless said.
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
‘Additionally, it cannot be bought and sold as quickly as shares, meaning price movements are not as volatile.’
While Australia’s borders have been closed since March 20 to non-citizens and non-residents, property market commentator Michael Yardney argued a return to high immigration would boost demand for housing in Australia.
‘Since 60 per cent of our growth is dependent on immigration, in the short-term population growth will fall, but they should increase again as soon as overseas immigrants will be allowed to come to our shores,’ he said.
Nonetheless, the Commonwealth Bank is forecasting a 32 per cent fall in Australia’s median house prices by 2023 in a worst-case scenario.
This would see Sydney’s median house prices plummet by $328,454 to $697,964 going by CoreLogic data for April.
Capital city houses prices have so far weathered the COVID-19 pandemic, with Sydney’s median house price rising by 0.3 per cent in April, or 15.8 per cent on an annual basis, to $1.026million.
Sydney’s auction clearance rates have also recovered, surging from 33.8 per cent in mid-April to 77.9 per cent in the week to May 24, CoreLogic data showed.
In Brisbane, it has risen from 18.8 per cent to 45.9 per cent as Melbourne’s level soared from 27.9 per cent to 72 per cent.
Auction clearance rates have also recovered, surging from 33.8 per cent in mid-April to 66.9 per cent in the week to May 17, CoreLogic data showed. Pictured is an auction at Coorparoo in Brisbane’s inner-south