It’s been a tumultuous few weeks and no doubt we are all still grappling with the ongoing COVID-19 pandemic and what it means for us, for our families and our way of life.
In bringing you our latest housing statistics for March, I trust that your families are safe and well.
We are starting to see some impact from the virus on housing market conditions due to a drop in consumer confidence and weaker economic conditions.
The trend in housing values actually remained positive through the months, with CoreLogic’s national index rising 0.7%, however, the second half of the month saw a weakening in the growth trend as confidence slumped and social distancing policies took effect.
The result for March was actually the lowest monthly gain since the growth cycle commenced in July last year, and likely sets the tone for housing market conditions over the coming months.
Although Australia’s housing markets are entering a period of disruption, they are doing so from a strong foundation.
Last month, every capital city and rest of state housing market recorded a rise in housing values, apart from Hobart.
Settled sales have been trending higher and most cities have staged a recovery from the previous housing market downturn.
The trends have generally been positive across each of the capital cities.
We can take some guidance from previous economic shocks, which have typically shown housing values to be far less impacted than equity markets.
In fact, housing values have generally held relatively firm during these periods before showing a strong upwards trajectory due to stimulus measures such as low-interest rates.
The transactional activity has been more affected, with annual sales falling 39% after the Black Monday stock market crash in 1987.
The Asian financial crisis in 1997 saw housing sales fall by 22%, and sales were down 34% following the Tech Wreck in 2001.
More recently, the Global Financial Crisis saw the market activity drop by 23%.
This time around we aren’t expecting the housing market will be immune to a drop in sentiment and weaker economic conditions, however, the extent of the impact on dwelling values remains highly uncertain.
Capital growth trends will be contingent on how long it takes to contain the virus, and whether additional policy constraints are rolled out for businesses or for personal activity.
From a transactional perspective, we are expecting the number of residential property sales to fall dramatically over the coming months – that’s a consequence of tanking consumer confidence, a rising jobless rate, and more cautious lending practices.
Restrictions on open homes and on-site auctions will also add to the slowdown in buyer activity, although we are seeing the real estate sector broadly adopting digital enablement strategies to ensure homes can still be inspected, sold and settled remotely.
Considering the temporary nature of this crisis, along with unprecedented levels of government stimulus, leniency from lenders for distressed borrowers on their mortgage repayments and record low-interest rates, housing values are likely to more be insulated than sales activity.
These factors should help to limit the number of distressed properties hitting the marketplace and keep a more material decline in housing values in check.
The coming months will truly be testing for markets, for businesses, for families and the global economy overall, but it won’t last forever.
As the virus is contained, economic conditions will improve and consumer spirits will lift.
from Property UpdateProperty Update https://propertyupdate.com.au/national-housing-market-update-australia/
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