- Property prices in Australia appear to be turning negative as the coronavirus shutdown turns the tide on the market.
- Weekly capital city price growth has turned negative for the first time since August, while the rolling 28-day average has fallen from 1.1% to 0.4% heading into the backend of April.
- CoreLogic analyst Eliza Owen said it “seems hard to digest that property values have not plummeted” given the state of the market in a note issued to Business Insider Australia.
- Visit Business Insider Australia’s homepage for more stories.
You might spot the iceberg first, but it can take a while for the ship to creak.
Well, the property market finally looks like it’s letting out its first groans as weekly price growth flashes negative for the first time in eight months.
“From a values perspective, the CoreLogic hedonic index has been showing a loss of momentum in housing value growth rates since mid-March,” Corelogic analyst Eliza Owen said in a research note.
“Data through to mid-April has seen a continuation in this trend, with the combined capital city measure slipping into negative territory week-on-week for the first time since early August last year.”
It’s the first major indicator prices are in fact going south amid the coronavirus outbreak, slashing monthly national growth from 1.1% last month to 0.4% as of 21 April.
With momentum unlikely to rebound for some time, that 28-day measure could soon enter the red, with Owen admitting it”seems hard to digest that property values have not plummeted” given the RBA’s economic assessment and echoing other forecasters.
“Such extreme contractions in the economy could exacerbate the structural risk of high housing debt in Australia,” Owen said.
“With large losses in jobs and hours worked, the same level of income is not available to service high housing debt. This would presumably mean more people having to sell property, or a larger volume of distressed sales,” she said. “And yet, there is so far no evidence of that.”
One factor Owen points to as perhaps propping up the stats is the heavily sedated state of sellers. Government restrictions prohibiting live auctions and open houses combined with uncertainty surrounding the economy have kneecapped market activity.
Case in point: CoreLogic acknowledges the current number of properties on the market has fallen by almost 30%. Meanwhile, this Anzac Day weekend has all of 314 auctions scheduled nationally. For reference, Melbourne did more than 1,000 alone last weekend, albeit without a public holiday.
It’s unsurprising that as auction clearance rates have basically halved, so too are the number of sellers falling.
“The fact that this is a temporary, enforced downturn means that vendors might be holding onto a relatively high expectation of their property value, with a view to sell once the economy returns to full-scale production,” Owen said.
“The only people listing their property in the current climate may be those who need to sell because paying off a mortgage is no longer affordable.”
While a freeze on home loan repayments has helped keep forced sales to a minimum, if the economy hasn’t returned to normal in six months, more assistance may be required yet.
If it’s not forthcoming, property prices may not hold up quite so firmly.
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