Coronavirus restrictions tipped to send Australian house prices tumbling
Economists have forecast house prices in Australia will fall following coronavirus-related restrictions on real estate operations and the mounting tally of huge job losses across the economy. On-site auctions and open house inspections will be banned from midnight on Wednesday under the government’s latest attempts to prevent the spread of Covid-19.
And although industry insiders remain bullish about the market’s ability to emerge from the restrictions with renewed demand, economists have painted a “disturbing” picture of the Australian jobs market, which could spell doom for property prices.
The consultancy Capital Economics said on Wednesday the curbs on viewings would “probably result in lower home sales” and there was even a danger the government would ban the buying and selling of real estate altogether.
The rise in unemployment as the Australian economy rapidly shuts down would limit demand, Capital said, with prices likely to fall by up to 10% later in the year.
“Even once restrictions to prevent the spread of coronavirus come to an end, we suspect that rising unemployment and tightening bank lending conditions will result in weak housing
demand and falling house prices,” said Marcel Thieliant, Capital’s senior Australia and New Zealand economist.
Westpac’s chief economist, Bill Evans, was even gloomier about the economy, predicting the unemployment rate would reach 11.1% by June and would not recover until the end of the year.
However, there was optimism at the sharp end of the housing industry that the setbacks could be short-lived.
The president of the Real Estate Institute of Victoria, Leah Calnan, said the industry could carry on trading by moving from open inspections to private ones by appointment.
A “reasonable proportion” of real estate business was already conducted online, she said, with the larger franchise real estate groups especially advanced. Online auctions were set up in the normal way, but with the auctioneer calling the bids by video link.
She said the restrictions would “probably be a problem” for the market because some buyers might not want to conduct auctions online. But it nevertheless had the underlying strength to bounce back.
“It’s hard to know what impact it’s going to have but it will certainly adjust how real estate industry operates,” she said. “It will probably reduce the number of transactions over the coming months. But the way the market was at the end of 2019 and the auction clearance last weekend of 68%, if we can get through this and into spring then we should see the market return. People need to have property transactions.”
Her view was supported by S&P Global Ratings. It said in a note to clients on Wednesday that although rising unemployment and depressed consumer and business sentiment in the wake of the Covid-19 outbreak had increased the downside risks for property prices, the setbacks should only be felt in the short term.
“Although it is difficult to be definitive in these rapidly changing operating conditions, we currently foresee a downturn in the property sector to be relatively short lived,” it said.
Auction clearance rates in Sydney and Melbourne last weekend were down on the previous week, but were still 64% and 63% respectively. CoreLogic’s daily updates showed prices were still climbing this week.
James Kirkland, national sales and operations director of Sydney-based Upside Realty, said the business was already using software such as Skype, Zoom and FaceTime to give would-be buyers a virtual tour of properties and paperless contracts.
He said the market was healthy and he was seeing “a lot of urgency to buy”.
“We’ve seen overall numbers go down but the people coming through are fully qualified buyers, not the tyre kickers. They are genuine, ready-to-buy purchasers.
“Property is stacking up well as an investment compared with shares. If it is priced well, presented well and promoted well, it will sell and we’re not seeing any change in that.”