Why homeowners should not expect the worst with housing prices amid the COVID-19 outbreak
Huge plunges in house prices are now appearing less likely as Australia’s strong financial systems gives owners and investors some breathing space.
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Homeowners who are worried the value of their property will plunge by almost one-third should take heart the reality is likely to be much less painful.
Reports surfaced last week warning of house price falls of up to 30 per cent, but economists and real estate specialists say Australia’s strong financial system is supporting property owners and should stem heavy losses.
Late 2020 might even be a good time to buy property, depending on how the coronavirus pandemic plays out.
Home values increased in every capital city in the March quarter, according to CoreLogic data, despite COVID-19 hitting hard towards the end of the three-month period.
CoreLogic head of research Tim Lawless said while home buying and selling would effectively stall for months, prices were likely to be more insulated.
Mr Lawless said unemployment and the economy would take a big hit but six-month repayment holidays offered by lenders would give owners and investors some breathing space.
“That should stymie the flow of distressed property on the market,” he said.
The temporary nature of the virus crisis would also help property prices, Mr Lawless said.
“I would be surprised if values fall by significantly more than 10 per cent,” he said.
High-rise apartments and the premium end of the market were more likely to suffer sharper falls than traditional suburban homes, Mr Lawless said.
Realestate.com.au chief economist Nerida Conisbee said property markets were diverse so forecasting a 30 per cent decline “doesn’t mean anything”.
“At the moment we can see renters in distress but you are in a better position if you are a property owner,” she said.
“It’s not a financial crisis and our banking system is still solid. We would be in a different position if we didn’t have a strong financial system and things like mortgage repayment freezes.”
Ms Conisbee said the areas likely to be hit the hardest were those relying our tourism and education.
“And there’s a real spiral that’s occurring within rental properties,” she said.
Property investor, author and university lecturer Peter Koulizos said landlords were already being warned of rents dropping between 5 and 15 per cent because of rising supply and falling demand.
Distressed renters were moving back home to mum and dad or sharing with others, he said, while investors who previously used their property for short-stay rentals through Airbnb were returning to the traditional rental market.
“I think investors will feel it more, and we are all going to take a hit – some harder than others,” he said.
“There’s no doubt there will be some people in trouble and some people will have to sell.
“But we have six-month mortgage holidays and, unlike the 1990s, interest rates are at 2 to 3 per cent, not at 15 to 16 per cent.”
Originally published as Why homeowners should not expect the worst with housing prices amid the COVID-19 outbreak