Melbourne Housing Market Update Amidst Fears That Property Prices Will Fall in 2020
Despite the large impact on Australia’s economic conditions following the outbreak of the COVID-19 pandemic, housing prices still remain strong, even achieving growth in the first quarter of 2020.
Regardless of sustained high housing values, there have undoubtedly been impacts on the property market since the virus reached pandemic status in March this year. Consumer confidence has dropped and overall weaker economic conditions have ensued following rising joblessness and the lack of availability of nonessential services.
At the outset of social distancing measures, Melbourne housing price growth had slowed down to just 0.7%. This was the lowest rate since the growth cycle which began in July, 2019 and manifested an overall 8% increase in property values by the end of the year. The strong foundation established in 2019 has provided steady economic conditions which have led to relatively unaffected housing prices in 2020. Meanwhile, other sectors have experience significant economic disruption.
Melbourne has recovered from previous downturns in the housing economy, the 2008 Global Financial Crisis most recently and the 2001 tech wreck before that. Indeed, the housing sector is generally far less impacted during times of crisis than equity markets. The housing market usually thrives post-crisis too in-line with delivery of stimulus packages from the Government and lower interest rates set by the Reserve Bank of Australia.
Capital gains in the property market have been slowing since October, 2019. Housing prices continue to rise, but the overall profitability of the housing market has dropped. Overall capital gains have slipped to 0.4% – the lowest figure since May, 2019. These impacts have been felt the hardest by the premium end of the housing market, where growth has been cut in half, from 3% to 1.5%.
It’s expected that the volume of residential sales will fall as consumer confidence tanks, joblessness rises and restrictions on business activity are maintained. It appears banks have been overall kind to mortgage holders in reduction of mortgage payments, but less properties are set to close in the current circumstances than last quarter, despite digital alternatives to inspections and auctions being offered.
The time it takes trends in the housing market to recover and regain the growth that was a hallmark of 2019 will depend on the time taken by Australian health authorities to contain the virus and the Government to relax quarantine restrictions. With the number of new cases in Australia dropping to significant lows, and predictions that activity will resume as normal at the end of May, it’s expected that the Melbourne housing market will recover quickly, particularly in family-friendly and blue-chip suburbs.
This time has been trying for us all, but won’t last forever. When the virus is contained, we can expect to experience improved economic conditions and higher consumer spirits. We offer our full support to anyone impacted by the coronavirus pandemic.