The coronavirus outbreak clearly presents some downside risk for the Australian housing market, but ultimately, the impact remains highly uncertain. New information and policy responses are unfolding daily, making it impossible to provide a reasonable forecast of capital growth. Some added context however, is remembering the fundamentals of the property market, and idiosyncrasies of a pandemic-led downturn.
Property is less volatile and slower to respond to market shocks than equities, it is a consumption good and it is tied to fundamentals of employment opportunity and income growth. In the current climate, the Australian housing market is more insulated from foreign demand and investment speculation than it has been over previous years.
Transaction activity is likely to be impacted more than market values. As consumer confidence reduces, and labour markets are disrupted, more Australians are likely to put high commitment decisions on hold until there is more certainty around the economy, jobs and household finances.
Additionally, stimulus measures including emergency level monetary policy settings and a surge in fiscal spending should help to cushion the impact of reduced business activity, but a recession in the first half of 2020 still looks likely. The current high level of household debt amplifies the risk of unemployment on housing market conditions. However, areas severely impacted by social distancing would be less resilient than others in rebounding from the coronavirus pandemic. Our views and research on the market outcomes in relation to the coronavirus will continue to evolve as more information comes to light.
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