With a renewed outbreak of COVID-19 cases in Melbourne and NSW, experts are expecting substantial property price falls; though the risk to Melbourne prices is greater because of the city’s return to a full, six-week lockdown. So far, property markets overall have proven relatively resilient. For the three months to June 30, Melbourne dwelling prices fell by 2.3 per cent and Sydney prices by 0.8 per cent. However, prices are still up by more than 10 per cent in the past year, figures from CoreLogic show.
Nevertheless, average price changes can mask big differences in various property market sectors. For example, one-in-three of Melbourne CBD apartments that were sold in the first three months of the year – even before the pandemic hit – changed hands for less than their purchase price. Almost 70 per cent were owned by investors. Vacancy rates for apartments in Melbourne’s CBD and for Southbank, in particular, and in Sydney’s CBD, remain persistently high. AMP Capital chief economist Shane Oliver says high unemployment, a pause in immigration and rent payment “holidays” pose major threats to property prices over the next year. He expects home prices to fall by 5-10 per cent nationally, with price dips in Sydney and Melbourne at the top end of that range. “[There is a] risk of much bigger falls if the renewed rise in coronavirus cases leads to an Australia-wide lockdown,” Oliver says. “Melbourne, particularly, is at risk as its renewed lockdown pushes more businesses and households to the brink,” he says. Economists at NAB, led by Alan Oster, expect the COVID-19-induced recession to result in peak-to-trough price declines of 10-15 per cent. NAB economists are forecasting Sydney prices to fall by just under 10 per cent from the start of this year to the end of 2021. For Melbourne, they expect a dip of about 14 per cent over the same period. Tim Lawless, Asia-Pacific research director at CoreLogic, says “stay at home” rules would likely mean the market is significantly disrupted again, after an improvement in sales numbers since Easter. A variety of factors have helped protect home resale values from more significant damage, including lower stock levels and significant government stimulus, Lawless says. That is in addition to record-low interest rates and lenders’ mortgage repayment pauses that have helped keep forced sales off the market. Figures released last week by the Australian Bureau of Statistics show national demand for new home loans plunged 11.6 per cent in May. “This was the largest fall in history, driven by strong declines in the value of loan commitments for housing in NSW and Victoria,” said Bruce Hockman, ABS chief economist. The value of new loan commitments for owner-occupier housing fell 10.2 per cent, while investor housing loan applications plummeted 15.6 per cent. The number of owner-occupier first-home-buyer loan commitments fell 9.3 per cent. The figures for May reflect COVID-19 restrictions in April, as home loans can some time to settle. Simon Pressley, managing director and head of market research at buyer’s agency Propertyology, says the May data was expected, as it was the month when the lockdowns were at their tightest. “Since then, Australia has opened up considerably, with the exception of Melbourne,” Pressley says. Melbourne and Sydney have the most exposed property markets as both cities are disproportionately affected by a freeze on international tourism, international students and overseas migration, he says. Still, Pressley maintains price declines in the two cities would not likely be in the double digits. “Record-low interest rates, many mortgage holders having cash reserves in redraw, low supply of real estate sales listings, empathic banks, and government support packages provide a safe cushion for property markets,” he says. Source