SYDNEY, Australia – Melbourne’s property markets had an incredibly strong rebound in the last quarter ending February 2020 after a recent downturn.
Both the housing markets in Melbourne and Sydney picked up remarkably after a recent downturn. The property market in the period starting June 2019 to February 2020 is showing an impressive rise, even showing a record high in February.
However, the start of the ongoing health crisis due to coronavirus ultimately put a dampener on the current economic climate of the country.
PRDnationwide commented that the central bank decided to make a cash rate cut in March. It came, according to the real estate network, after the Reserve Bank previously had positive projections and held on to the stability of the cash rate in February.
Moreover, the education and tourism industries are also experiencing difficulties due to the ongoing health crisis. Educational institutions are seeing a considerable decline in enrollments as well as the need to adjust or make a new learning system that they could implement during the city-wide lockdown.
Meanwhile, the tourism industry is profoundly affected by the current travel restrictions causing tourists to cancel their holidays.
According to PRDnationwide, there is also a current decrease in unique listings, as well as in vacancy rates.
However, the real estate network remains adamant that there are no significant concerns for investors during this coronavirus outbreak. PRDnationwide also noted that the present data is not showing any long-term effect on market viability.
The real estate network also stated that despite the drop in the short-term rental market’s unique listing, the vacancy rate in Melbourne and Sydney is still on a healthy level. The recent decline may suggest that these listings shifted to the long-term market instead. However, these changes don’t show any severe impact on the long-term market.
Eliza Owen, the head of research at CoreLogic, also agreed with the comments from PRDnationwide. She said that the current downturn in the economic climate is most likely temporary. Ms Owen further noted that the economy is looking for a solid return moving forward, where the prices and property transaction doesn’t reflect on the current structural changes, but the fundamentals of the country’s economy.
Similarly, Simon Pressley, the head of research for Propertyology, believes that there is a promising return for the property market.
According to him, the current economic climate is mostly similar to what Australia experienced previously. Mr Pressley noted that from the middle of 2019 to early 2020, most parts in the country are running price growth at double digits.
He added that the fundamentals are still there, and it will be there, especially with the economic stimulus worth $213 billion from the government. That includes the availability of cheap credit, tight housing supply, and low building approvals.
Meanwhile, the residential property prices steadily increased since June last year, particularly in the capital cities in Australia. Melbourne and Sydney recorded the sharpest gains.
However, the strong start of the property market in 2020 is more subdued at the moment, significantly feeling the massive effects of weak economic growth. The falling consumer confidence and government policies don’t help either, based on the latest House Hedonic Home Value Index from CoreLogic.
However, despite the current disruption in the market, Tim Lawless, the head of research at Core Logic, noted that the property housing is still standing on solid foundations.
Meanwhile, the property prices increased all over every capital city in Australia in March, except for Hobart, which recorded a 0.2% decline. However, every capital city in the country experienced an increase in housing values over the last quarter.
Over the period, Sydney recorded the highest growth, going up to 3.9%, followed by the 2.9% increase for Melbourne, and the 1.7% rise in Canberra.
On the other hand, the lowest in the chart includes Adelaide and Darwin, which recorded a measly 0.6% increase each.
Mr Lawless also commented that the property market is not immune to the weaker economy and the drop in consumer sentiments. However, he said that the extent of the effects on housing prices remains uncertain.
CoreLogic further stated that the existing relief measures on mortgage repayments and lower interest rates could shield the residential housing prices from the impending downturn.
Mr Lawless also highlighted that property values are looking to gain more support over the sales activity, considering that the current crisis is only temporary.
Meanwhile, the property market in Australia has positively avoided any massive impact of the COVID-19 pandemic when it comes to supply and demand. The market is showing high sales volumes and robust clearance sales, based on the latest CoreLogic data.
There is a 70.6% increase in the preliminary auction clearance prices for the week ending March 15. There were over 2,200 houses in the auction, combining the numbers from Australian capital cities.
From the 1,173 auctions during the week, there was a 70.1% preliminary auction clearance rate in Melbourne, while Sydney recorded 74.6% on all 749 sales.
Brisbane followed with a 51.7 clearance rate for the total of 102 auctions and Adelaide selling 68.4% of the 99 sales held.
Meanwhile, Shane Oliver, the chief economist at AMP Capital, commented that the economy of the country might be heading towards a recession. He said that the March and June quarters’ decline in gross domestic product (GDP) growth forecast is showing such.
Mr Oliver, however, commented that the imbalance in the supply and demand in the property market could help compensate the drop in housing prices induced by the coronavirus pandemic.
According to the CoreLogic data, Melbourne also recorded substantial migration numbers, which is helping it achieve the 10.7% growth.
Mr Oliver further stated that based on history, the household balance sheet has a resiliency when it comes to unexpected economic downturns. He added that there are only overstatements on current mortgage stress complaints in the country.
Mr Lawless emphasized that economic conditions are looking towards a rebound in the long-term in the second half of this year following the slowdown due to the pandemic.
Improving conditions in the Australian economy, low-interest rates, and the inflated sentiments should offer a much better stimulus level in the property sector, Mr Lawless added.