Coronavirus: Outbreaks raise fears of 30 per cent fall in property prices

A surge in Melbourne coronavirus cases could cause residential property prices to plummet, as a ‘worst case’ plays out.

Restrictions on auctions and open homes in Melbourne had been due to be lifted this weekend from a maximum of 20 people to 50, but these plans were put on hold. Picture: Alan Barber

An increase in coronavirus cases in Melbourne could cause residential property prices to fall by up to 30 per cent, as the “worst case” for the housing market plays out.

Data firm SQM Research offered a range of scenarios in April for how the pandemic could affect the property market, with falls of between 5 per cent and 30 per cent.

The situation in the Victorian capital is largely reflecting the worst-case modelling — a second wave of new cases, high unemployment and restrictions remaining in place for a longer period — which managing director Louis Christopher said was worrying.

“Definitely in Melbourne, the chance of that bleaker scenario playing out is more likely,” Mr Christopher said.

“The fact that we will have restrictions in Melbourne for longer is bad news. We are probably going to see a negative housing market in the Melbourne market until this (outbreak) is more contained.”

As case numbers quickly receded in Australia relative to the rest of the world, the consensus among economists was for a 5 to 10 per cent fall in property prices nationally. While national residential property prices for the quarter ending in May were up 0.6 per cent, according to CoreLogic, Melbourne was the only capital city to record a fall — down 0.8 per cent over the same period.

But demand on the ground is still high. Seven people have registered to bid on Peter and Julie Rowan’s family home in the second-wave hotspot of Hillside, northwest of Melbourne. The couple sold an empty block of land on Wednesday night and are hopeful of achieving their tree-change dream this weekend after moving their house auction online.

“With the virus going around at the moment, I think an online auction is a really good option — people bidding can be safe in their homes,” Mr Rowan said.

“Originally, I was dead against auctions altogether,” Ms Rowan said. “It was the low stock levels that convinced us to go. We are feeling good and confident.”

Restrictions on auctions and open homes in Melbourne had been due to be lifted this weekend from a maximum of 20 people to 50, but these plans were put on hold. The Real Estate Institute of Victoria has not been alerted to any tougher rules at this stage. President Leah Calnan said the activity levels on the ground negated the doom-and-gloom headlines.

“There is no evidence to suggest the property market will take that (30 per cent) sort of adjustment in prices,” Ms Calnan said.