News - 11 Nov, 2020

The Australian housing market is facing short-term uncertainty, but long-term recovery

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A recent report by risk management experts QBE Lenders’ Mortgage Insurance has outlined the projections for the Australian Housing market until 2023.

QBE CEO Phil White explained that the COVID-19 pandemic is currently the primary driver of Australia’s economy and housing market. 

“It’s affecting our economy in fundamental ways, including through a profound slowdown in overseas and interstate migration, tourism, education and, of course, jobs and growth”, he said. 


Current snapshot of the housing market

CoreLogic’s latest Hedonic Home Value Index revealed that in the seven months since the implementation of the initial lockdown, Australia’s five largest capital cities have experienced an average 2.7% decline.

However, CommBank Head of Australian Economics Gareth Aird noted that Melbourne and Sydney are responsible for dragging down the national average, saying “prices have risen over the COVID period in Adelaide, Hobart, Darwin and ACT while they are little changed in Brisbane”.

QBE’S report revealed that although the housing market is facing rough waters, Government incentives, and mass migration out of metro areas is creating an offsetting effect, which has contributed to the stabilisation of the housing market seen in recent weeks.

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Projections for 2020-2030

The report projects that between 2020-2023 Sydney is expected to see a total 1.2% decline in median house price growth and a 1.1% increase in unit prices.

By 2021, Sydney is likely to experience a 6.5% decline in house prices but will recover by June 2023, stabilising at 6% lower than the mini-peak of March 2020.

Property Update’s Michael Yardney noted that the easing of Melbourne’s restrictions had seen a recent boom in listings and auctions, giving an added boost to rising consumer confidence.

Like Sydney, Melbourne’s house prices are projected to see their largest decline in 2021 at -7.5% but will rise 5.3% by the 2023 June Quarter.  

Brisbane is forecast to experience a 4.2% decline in the median house price in 2020-2021 and a slow recovery in 2021-2022.

In 2022-2023, Brisbane will see strong price growth as a result of rising employment and income growth.

Perth, Adelaide, Darwin and Canberra will fair the economic impacts of COVID19 better than Australia’s largest cities.

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All four regions are expected to experience smaller declines than Sydney and Melbourne in 2021, and by 2023, see an improvement on 2020 house prices.

Hobart will be hit the hardest of all the capital cities, due to high unemployment rates and heavy restrictions halting interstate and overseas migration.

Hobart will have the slowest recovery of Australia’s capital cities and is forecast to see a 3.9% overall decline in median house prices between 2020-2023, more than doubling Melbourne’s overall downfall.

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Regional Boom

According to CoreLogic’s Hedonic Home Value Index, Australia’s regional areas have shown resilience during this time, with every state’s regional markets, besides Western Australian, experiencing an increase in housing prices.

CoreLogic’s head of research Tim Lawless explained the phenomenon, saying “we are also observing a transition of demand away from the cities towards the major regional centres, particularly those that are adjacent to the larger capitals”.

Due to increased affordability of Australia’s major cities, the regional boom is expected to come to an end in 2021, with prices stabilising in 2023. 

Source: CoreLogic Home Value Index Released 1 September 2020

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Government incentives helping to boost the market

Federal and state governments have implemented a plethora of initiatives to bolster the housing market, including HomeBuilder and the First Home Owner Grant

Mr Lawless paid tribute to the Government and their role in softening the economic fallout of COVID19 on the housing market.

“The aggregate effect of low mortgage rates and the prospect that rates could fall further, low inventory levels, government incentives and improving consumer sentiment seems to be outweighing the negative economic shock brought about by the pandemic”, he said. 

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Words by Nell Matzen

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