Despite Australian house prices holding steady during the beginning of 2020, asking prices for listed properties dropped during the month of March as sellers react to potential outcomes of necessary coronavirus restrictions. Asking prices have fallen in major cities as sellers are keen to make a sale before further impacts of the health pandemic hit, with SQM Research predicting that a second viral infection wave could see the housing market fall by as much as 30%.
Unpredictability in the Australian housing market during the coronavirus pandemic is seeing properties listed at bargain prices, as sellers try to beat predicted market downfalls before they impact the economy.
Despite small shifts is property pricing around Australia, house and unit prices have so far remained relatively stable during 2020 and in many states are showing an increase in year-on-year prices compared to 2019. Despite this, economists are predicting that dramatic falls in property pricing could soon hit the Australian property market as an outcome of the coronavirus restrictions that put a temporary halt to traditional home opens and auctions, as high numbers of listed properties have their prices revised.
City property markets around the country mostly fared well during April, particularly in Sydney and Melbourne. During the month Sydney house prices rose 1.1%, although unit prices decreased 0.6%, while in Melbourne house prices rose by 0.3% and unit prices were up a full 1.0%.
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Adelaide and Darwin also both recorded increases in both house and unit prices, with Adelaide prices rising 0.5% and 0.1% for houses and units respectively, while Darwin property prices were up 0.1% for houses and 0.2% for units.
On the other end of the spectrum Perth, Canberra and Hobart all recorded drops in both housing and unit prices. In Perth, house prices dropped by 0.9% and unit prices by 0.5%, Canberra houses and units both fell by 0.1%, and Hobart house prices were down 0.7% while unit prices fared a little better falling only 0.3%.
Brisbane recorded the largest drop in house prices, falling a full 1.0%, though unit prices rose during the same period to close the month up 0.6%. Nationally house and unit prices increased during April, up 5.7% and 4.2% respectively.
Year-on-year every city showed improvement on both house and unit prices as compared to 2019, except for Perth and Darwin. Sydney house prices topped the chart, with a year-on-year increase of 12.4%, closely followed by Hobart’s 12.0% increase and Melbourne’s 11.2% increase. In unit pricing, Hobart had the most significant increase, up 17.1% on 2019, with Canberra units up 4.0% and Melbourne units up 3.8%.
Despite what seems like mostly positive movement in the housing market, in a worst-case scenario situation SQM Managing Director and Research Chief Executive Louis Christopher has predicted that the coronavirus pandemic could result in property prices dropping by up to 30% if Australia experiences a second wave of infections from the virus or if the new case count of infection never reaches zero. More conservative predictions show various city markets dropping by between 6.4 and 10.5% by 2021, with the Hobart and Sydney markets tipped to take the hardest hit. With the unemployment rate moving towards 10% and current interest rates at historic lows, many economists are predicting drops in house prices across the country during the remainder of 2020.
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Figures show that sellers seem to be taking these predictions on board as, despite prices holding relatively stable, many sellers are adjusting price expectations on listed properties. During March the Sydney and Melbourne property markets saw more price changes than at any other point in the market downturn. The asking price for 14.1% of listed properties in Sydney was adjusted during March, dropping an average of 4.36% or $51,000, while in Melbourne asking prices dropped an average of 4.07 or around $37,380 on 12.6% of listed properties. The sharp drop suggests sellers in these markets are keen to get a sale through before property prices take further hits.
According to SQM Research property listings were also down 4.9% in April, dropping from 307,847 national listings in March to 292,775 listings in April, while new residential listings have also fallen around 40% since mid-March.
Mr Christopher said the decrease in new listings, as well as a surge of interest in older listings, suggests that sellers struggled to move their properties during April.
“The housing market has clearly been weakened by coronavirus and the restrictions placed on the economy to limit the outbreak. With the lifting some restrictions over the course of May, we could see a lift in buyer activity for housing,” said Mr Christopher.
The RBA cut interest rates again to an all-time low of 0.25% in response to the coronavirus pandemic in an effort to offset a potential impending recession and boost the market.
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Words by Danielle Austin
- All price percentages sourced from SQM Research https://sqmresearch.com.au/05%2005%2020_National%20Property%20Listings%20Decrease%20in%20APRIL.pdf
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