Australians have seen a range of social and economic changes over the past couple of weeks and the housing market has been no stranger to these changes.
From the RBA’s emergency rate cut to the increasing unemployment rate, many are uncertain about what the future of the housing market could be.
We’ve already seen clearance rates decrease and a decline of activity in the market- but what do these changes mean for those thinking of investing or refinancing?
Clearance Rates are rapidly declining
With an impending recession and a higher number of Australians struggling financially, a pullback from buyers is likely as they lose confidence in their ability to invest.
According to CoreLogic, clearance rates plummeted to 56.9% and the withdrawal rate for auctions rose from 5% to 8% during the week that ended on March 22nd.
Social distancing measures have also meant that both buyers and sellers alike have been unable to attend public gatherings such as auctions and open houses.
Data from CoreLogic supported this, with a survey revealing that 33.9% of respondents, the majority of whom work in real estate, had seen buyer enquiries decline by more than 50%.
It is expected that the lack of transactional activity observed in the housing market will continue on for the coming months.
House Prices are Expected to Drop
The lack of activity seen in the market has meant March saw properties only gain 0.7% in value, which is the lowest monthly gains since July 2019.
The declining monthly gains seen in the market is expected to continue to grow weaker, as the economy is expected to fall into a recession.
The increasing unemployment rate is also expected to drive a drop in house prices, which could be as much as a 20% drop.
According to AMP Economist Shane Oliver, the unemployment rate might rise to 10% result in incite high household debt levels which will reduce the demand for property.
It is hoped that will be alleviated by the ‘mortgage holidays’ that are currently being offered by most banks.
However, it is possible that the offer of having a break from making mortgage repayments could also contribute to the stagnancy seen in the market.
For an update on each state’s property market:
- Guide to the Brisbane property market
- Guide to the Melbourne property market
- Guide to Adelaides property market
- Guide to the Sydney property market
Good news for tenants, bad news for landlords
Despite the suffering caused to the property market, data from Domain reveals that the rental market has been increasingly active.
According to Domain, the number of rental properties that have been listed over the past two weeks has increased by 19%, which was an increase of 39,252 properties.
Rent prices have also been decreasing, as the number of tenants who are unable to pay their rent has increased and overseas tenants have left the country.
As a result, landlords have had no choice but to reduce their rental income by dropping rent prices to fill up vacancies in their rental properties.
Owners of Airbnbs and short-term holiday rentals have also been putting their homes back on the long-term rental market.
For instance, in areas considered to be Airbnb hotspots such as Bondi and Coogee, there have been more than 2300 new listings.
So while landlords have the uncertain news of losing rental income, prospective tenants may be able to secure a cheap rental deal in previously expensive areas.
Thinking of refinancing?
With cash rates at historically low levels and with most banks passing on the rates, homeowners may be able to make cheaper loan repayments.
The big banks have all passed the rate cuts, with banks such as CommBank dropping their fixed rates by as much as 0.70%.
As well as the low rates, small businesses and homeowners can enjoy deals such as the mortgage holiday deal aforementioned.
For those considering the option of refinancing, now is an ideal time to shop around as you may be able to secure a deal that could save you money.
Related Article: RBA makes emergency rate cut in response to coronavirus crisis
Words by Vidya Kathirgamalingam
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