Six months or so into the COVID-19 pandemic, the exact fallout for the housing market remains unclear as a range of measures dampen and delay the effects.
Government stimulus such as JobKeeper, bank repayment deferrals, early access to superannuation and rental relief are all supporting the economy amid restrictions to contain the virus, which is obviously a good thing – albeit making forecasting particularly difficult.
Like the economy more broadly, the ultimate impact on the housing market will be largely determined by the course of the virus.
As our latest Housing Pulse explores, recent virus developments, including Stage 4 lockdown in Melbourne, have already delivered another deep shock to consumer confidence. More positively, prospects look good for reining in Victoria’s “second wave” outbreak by mid-September, and cases remain well contained elsewhere.
In fact, the very weak signals in Queensland and South Australia look overdone and consumers look to be underestimating prospects in Western Australia after a painful six years of dwelling price declines. Unsurprisingly, conditions are weakest in Victoria, with Melbourne prices expected to decline 12 per cent this year – outpacing a 10 per cent fall in the biggest market of Sydney.
For now, we remain comfortable with our core view that prices nationally decline 10 per cent in 2020. This could however take longer to play out given several moving parts.
Housing markets around the country continue to see big swings in turnover associated with the direct effects of COVID lockdowns, and a broad–based decline in prices, albeit with the latter coming through at a slower pace than at the height of the 2018–19 correction as supply in many markets remains low.
What property investors do this cycle will be another important factor.
The sentiment detail suggests that while investors are not about to rush back into the market, they also do not look to be facing the sort of financial stress that would see a widespread move to offload assets onto the market. Of course, some will be facing more intense strains and there could be a lift in “distressed” sales later in the year when there is also likely to be more active selling from distressed owner occupiers as support measures taper off and the recession bites.
Looking further ahead, developments around a potential vaccine will become increasingly important to all markets and economies. While there are many risks around the several front runners in final testing phases, mass rollouts in the first half of next year would be a game changer.
In short, it’s all about the virus in 2020 and 2021 in terms of economic outcomes – and the same goes for housing market performances as well.
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