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Covid-19 ends strong house price rebound

Posted on 8 April 2020

Source:  Australian Property Journal

THE coronavirus pandemic and social distancing measures has likely put an end to the resurging housing market, and it is unlikely to simply bounce back post covid-19, according to ANZ Research. ANZ senior economist Felicity Emmett and market economist Hayden Dimes said prior to covid-19 taking hold in Australia and resulting in the government shutting down parts of the economy, one sector that continued to surprise on the upside was housing. 

They noted that house prices grew strongly through the second half of last year and in March were up 10% from the low in June 2019. However, they said the shutting down of auctions and open homes, is very likely to put an end to that strong growth. Last weekend more than 1,500 of the 2,723 properties scheduled, were withdrawn from the auction market after the government announced a ban on public gatherings. Clearance rates nationally also dived nationally to around 30%. "We suspect with these measures, many potential buyers and sellers will simply withdraw from the market until the virus is under control and social distancing measures are eased. "As buyers and sellers dry up, we think properties that do trade through this shut-down period will see price falls with only some sellers willing to enter such an uncertain market,"

Meanwhile the ANZ Housing Search Index (HSI), which combines internet search numbers for house buying related terms, fell sharply in March. "This suggests we should see house price growth start to slow in coming months. "Specifically the HSI suggests annual house price growth will turn over by June. This effectively indicates a fall in the level of house prices as early as this month. That would be consistent with the flattening out in daily house prices, as well as the downturn in house price expectations," they said.

AMP Capital's chief economist Shane Oliver predicted house prices could decline by 20%. Emmett and Dimes said once the social distancing measures are removed, it is unlikely prices will simply bounce back. "Despite enormous fiscal support, unemployment is still expected to rise sharply through this period and is unlikely to fully recover for some years. This, with a possible reassessment of debt appetite, will likely result in a slow recovery for house prices," they concluded.

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