Despite the ongoing concerns about what the impact of COVID-19 will be on the broader Australian economy, house prices have remained resilient.
Across the major house prices indexes, there has been very little change in median values over the last month, which is not in keeping with many of the current claims, projecting significant drops.
President of the Real Estate Institute of Australia, Adrian Kelly, believes predictions suggesting that house prices are in for 30 per cent falls are ‘highly questionable’.
“We are in unprecedented times and anyone that suggests they can forecast with any acceptable degree of probability is being highly fanciful,” said Mr. Adrian Kelly
“Currently, we have a situation where listings are decreasing yet the enquiry level from prospective buyers is increasing. It is simple economics that when supply decreases and demand remains that prices edge upwards. They certainly don’t drop.”
Mr. Kelly says that when you look at the last recession in Australia, house prices remained robust.
“History shows us that in the early 1990s we had a sustained period of unemployment above 10% yet median house prices remained stable”.
“It needs also to be remembered that in ‘the recession we had to have’ interest rates for housing loans were around double what they currently are. I do not believe that this points to a catastrophic outlook for house prices.”
NSW Median House Prices compared to Unemployment and Interest Rates - Source: REIA
Victoria ‘holding its ground well’
Analysis from the REIV suggests that against the backdrop of widespread social distancing measures, house prices are still solid. According to the REIV Residential Market Index (RMX), prices have softened slightly, but are still higher than during the lead up to the Federal election last year.
President of the REIV, Leah Calnan says the data indicates that as of yet, there has not been any meaningful impact on house prices in Victoria.
“Victorian property prices have held firm during COVID-19, prices are higher than they were 12 months ago,” Ms. Calnan said.
“There are many predictions circling about real estate and the economy in general, but looking at what the actual data tells us, the Victorian market is weathering the storm well.
"At this time, prices are not as affected by the Coronavirus pandemic compared to sales volume, which remains much lower than expected at this time of year,” she said.
The RMX index is an accurate and up to date reflection of current price trends in Victoria. Currently, values are down slightly during the period where restrictions have been in place, but as of last week that downtrend has broken and prices are turning back up.
“The Victorian market continues to show strong resilience, with the return of public auctions and easing of some restrictions, we expect transaction volumes to start building soon .”
RMX Index - Source: REIV
RMX Index - Source: REIV
Buyers are Still ‘Lining Up’ in NSW
President of the REINSW, Leanne Pilkington, believes the doomsday predictions around property price falls are unfounded.
“I would love if someone went back in history and had a look at the claims that property is going to fall 30-40%. This has been occurring for decades and it never happens, yet we never go back and revisit that.”
“What I’m hearing in the market is that in some areas there haven’t been any drops at all, and there are some that might have discounted properties by 5 or 10%. But it all comes down to the level of demand for the property and the vendor’s motivation.”
Across NSW listings numbers are down, but Leanne Pilkington believes active buyers will keep prices propped up.
“At the beginning of this year, we were seeing clearance rates in the 70s and 80s. So that’s telling you that there is low supply and high demand and when that happens prices go up.”
“That underlying demand hasn’t gone away completely. When that happens prices just don’t drop, because they don’t need to. Around the Northern Beaches in Sydney, there were queues outside open homes last weekend. That tells you there is strong demand from buyers.”
Leanne Pilkington feels that one of the key issues is that negative headlines are weighing on vendors. But on the ground buyers are still very active.
“Listings are still low and part of that is that vendors are listening to the media. If they think they are going to take a 30% drop, they’re not going to sell.”
Vendors preparing to come back in Adelaide
Interim General Manager of the REISA, Andrew Shields thinks that the South Australian market is well-positioned to ride out the fallout from COVID-19.
“Our market in Adelaide is very conservative and less dependent on foreign buyers or investors. So we feel we’re not going to see those same price adjustments as other areas.”
Mr. Shields believes that while listings have fallen, behind the scenes agents are preparing for a surge in interest from both buyers and sellers.
“The initial shock from COVID, saw agency agreements drop by about 30% in March and early April. So at the moment, we will still see a shortage of listings in the marketplace which are down by 10 per cent on this time last year.”
“What we think is likely to be the case, is that there are a lot of vendors preparing to list their property and they are waiting until the next set of restrictions to be eased in early June for them to launch those campaigns. We predict a very busy June and July, or at the least a very busy Spring.”