What property plunge?
House values during the pandemic have not plummeted, as some experts had warned, writes Anthony Keane
HOME values are holding up strongly after two months of Australia in lockdown, but a big test looms in October when government and bank assistance dries up.
New data from CoreLogic shows capital city prices have barely moved in two months, despite warnings by some forecasters that property values could collapse by 30 per cent.
Economists and real estate specialists say prices have been propped up by JobKeeper and other government assistance, lenders’ mortgage repayment holidays and ultralow interest rates.
AMP Capital chief economist
Shane Oliver said government and bank assistance packages had put a lid on unemployment and helped household incomes.
“We’re in a bit of a twilight zone at the moment where there’s been a big hit on the economy but it hasn’t flowed through to the property market,” he said.
“Now the damage to the economy can start to be unwound, but probably won’t be fully unwound by the end of September.”
Repayment holidays and wages subsidies are set to end in late September and could spark a financial crunch.
“There will still be some hit to the property market as we go into October – not all the jobs that have been lost will come back,” Dr Oliver said.
He said home prices could fall later this year and early next year, but noted the Commonwealth Bank’s warning this month of a potential 32 per cent slide was its “risk case” based on a prolonged economic downturn.
“You could argue it’s a slightly better time to sell now rather than buy,” Dr Oliver said.
As of last week, CoreLogic’s home value index showed capital city house prices were almost identical to where they were in March and April.
CoreLogic head of research Tim Lawless said house price falls could flow from forced sales if loan arrears spiked after October, but right now distressed properties were rare.
“There is not a lot of homes for sale, which suggests there isn’t any sign of panic selling or forced selling in the market,” he said. And when October arrives, lenders might review their leniency policies rather than spark a property price plunge amid forced sales, Mr Lawless said.
“Sixty per cent of banks’ balance sheets are exposed to residential mortgages, so it’s in their best interests to manage hardship as flexibly as possible without flooding the market with distressed properties,” he said.
Realestate.com.au chief economist Nerida Conisbee said banks would try to avoid creating forced sales, given the battering they took from the banking royal commission.
“We can see that buyer activity levels have surged back, and the increase in inquiry levels on realestate.com.au shows a level of intent,” she said.
Ms Conisbee said buyers and sellers should keep an eye on their markets, as some parts – such as new apartments – were “more challenged” than others.
The current climate might deliver sellers the price they wanted if they had a good agent, she said, while buyers planning to hold for at least five years should be OK.