The Australian property markets continue to defy all those doomsday predictions of significant price drops as a result of the COVID-19 pandemic. 
Over the last few months sections of the media have been talking down real estate by publishing the thoughts of all those experts chasing a headline with dire predictions of significant property price falls.
New research and analysis by the Property Investment Professionals of Australia (PIPA) has found that house prices increased by as much as 100 per cent in the five years after the most recent recessions.
The research, conducted by PIPA Chairman Peter Koulizos, analysed annual median house price and index data for seven consecutive years including the start of each recession or economic downturn from 1973 to the GFC.
The data found that five years after each of the recessions or economic downturns over that time period, capital city house prices often increased significantly.
“In fact, looking back over the past nearly 50 years, house prices were higher five years after a recession or downturn each time,” Mr Koulizos said.
“Some locations performed better than others, mostly likely due to local economic factors after each period.
“However, the research shows that talk of impending property ‘doom’ has never happened in recent history – and these recessions or downturns lasted multiple years rather than a few months.”
Forecast price falls are questionable
The Real Estate Institute of Australia (REIA) has also shot down suggestions that property prices could fall by 30 percent, calling such a prediction “highly questionable” and unable to be relied upon “with any degree of confidence”.
“We are in unprecedented times and anyone that suggests they can forecast with any acceptable degree of probability is being highly fanciful,” said Mr Adrian Kelly, President of the Real Estate Institute of Australia.
“We can only look at what is happening in the market place at the moment as well as in previous times of high unemployment to provide pointers to likely outcomes.”
“Currently we have a situation where listings are decreasing yet the enquiry level from prospective buyers is increasing. It is simple economics that when supply decreases and demand remains that prices edge upwards. They certainly don’t drop.”
“Recent forecasts suggest that the supply of new housing will be severely constrained over the coming year. The Housing Industry Association is expecting the building of new dwellings to fall by almost 50 percent over the rest of 2020 and into 2021. This does not suggest a scenario of supply exceeding demand – a prerequisite for falling prices. ”
“Whilst it is expected that higher levels of unemployment will provide a constraint on house prices the anticipated levels of around 10% have been experienced before and we should look at what happened to housing prices then.”
Graphs 1 and 2 below show median housing prices, interest rates, and unemployment rates for the period from 1980 for News South Wales and Victoria – Australia’s two largest housing markets.
“History shows us that in the early 1990s we had a sustained period of unemployment above 10% yet median house prices remained stable”.
“It needs also to be remembered that in ‘the recession we had to have’ interest rates for housing loans were around double what they currently are.”
“I do not believe that this points to a catastrophic outlook for house prices,” concluded Mr Kelly.
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from Property UpdateProperty Update https://propertyupdate.com.au/doomsday-housing-price-forecasts-highly-questionable/
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