Coronavirus fears threaten WA’s housing market recovery

Coronavirus fears could flatten out Perth’s residential property market and delay its long predicted recovery.

Low consumer sentiment has long been an issue for the Perth market

Coronavirus fears could flatten out Perth’s residential property market and delay its long predicted recovery.

After persevering through a prolonged and steep downturn sparked by the collapse of the mining boom in 2014, the West Australian housing market had shown signs of a revival.

Rising population numbers, shrinking vacancy rates and modest but sustained price growth over the quarter to February of 0.4 per cent had put the city on an upward trajectory.

But the market could be hit by economic shockwaves prompted by the coronavirus outbreak hurting consumer confidence and hindering the home market before it has a chance to take off.

Real Estate Institute of Western Australia president Damian Collins said growth of 3-6 per cent had been expected this year, but admitted this would probably change if the virus generated a prolonged economic effect.

“We haven’t seen any impact on the market yet, but if the crisis expands, it will certainly have a short-term, maybe three to six-month, impact,” Mr Collins said.

“It will make more people sit on their hands until they get comfortable to make big decisions.”

Low consumer sentiment had long been an issue for the Perth market and contributed to the length of the previous down cycle, Housing Industry Australia chief economist Tim Reardon said.

Tim Reardon, chief economist at the Housing Institute of Australia

The west coast capital is not as reliant on trade and tourism as its harder-hit east coast counterparts. Neither has it seen the same number of coronavirus cases, with only six of Australia’s 120 cases in WA.

“The Perth market has suffered from a lack of confidence rather than an issue in fundamentals,” Mr Reardon said. “This consumer confidence could be impacted by sentiments around trade and tourism. It will be an impediment to slow up the market rather than ­return to ongoing growth. I don’t think it will see prices go back but slow for a period.

“Population growth and a tight rental market indicates Perth needs more homes. Confidence falls won’t affect that.”

It would be poor timing for the market to be dealt a blow, after several false starts over the past six years, said Steven Rowley, director of the Australian Housing and Urban Research Institute’s Curtin Research Centre. He said the lumpy recovery to date, largely centred in higher socio-economic areas, needed widespread support to take off.

“Anything that’s going to have an impact on market recovery is a problem,” Professor Rowley said. “We have some anecdotal evidence that new house building is picking up a little more activity. So you don’t want anything that could upset the ­momentum.”

While economic nerves may ring true, the viral outbreak was unlikely to trigger a “dead cat bounce” and cause prices to re-enter a free fall.

Mr Collins said he didn’t see the market “going back until it (the COVID-19) gets to crazy levels”.

Instead, Mr Reardon said the slowdown may also act as a stimulant to the market down the track, with delays to price growth and building activity having the potential to exacerbate the upturn.