Sydney lockdown won’t hurt property market

The current Sydney lockdown is likely to be a speed bump rather than a breakdown for the housing market.

If Sydney is able to get on top of this outbreak and lift lockdown before spring, it’s likely we’ll see hot conditions as the market makes up for lost time. Picture: NCA NewsWire/Joel Carrett

The current Sydney lockdown is likely to be a speed bump rather than a breakdown for the housing market. We expect activity to slow as sellers choose to wait until the market resumes full operation. The result of this may well be a bumper spring selling season.

The lockdown in Sydney has restricted much of the normal functioning of the property market since June 26 and will continue until at least July 30. While properties are still able to be sold, open houses and in-person auctions are out, and one-on-one inspections and online auctions are in.

Winter is traditionally a quieter time for property, so some slowdown in activity would be expected. But many sellers will choose to delay their sales campaigns until restrictions lift, which may contribute to a particularly robust spring selling season should the latest wave of the pandemic be under control.

The 2020 lockdown in Melbourne provides a good guide to what may happen in Sydney. Housing sales are likely to fall once selling campaigns that started before the lockdown are concluded. Determined buyers will still be able to find properties, but available stock will dwindle as the lockdown continues.

In Melbourne, the number of sales per week fell 70 per cent from pre-lockdown levels. Once the outbreak was brought under control and restrictions were lifted, sales started to recover. In fact, they quickly surged to almost twice the level pre-lockdown, making up for the slow period. We may not see the same slowdown in activity in Sydney as property inspections remain permitted for now, while they were restricted last year in Melbourne.

The Melbourne experience suggests Sydney prices will remain high and largely unaffected. Throughout Melbourne’s long lockdown last year, prices followed those in Sydney until August. A brief fall in September was made up once the lockdown was lifted. This suggests there may be a slight slowdown in Sydney prices if the lockdown continues for some time, but the effect on price won’t be lasting.

A new moratorium on rental evictions, along with disaster relief payments to affected individuals and businesses, will hopefully limit any short-term disruption to rental markets. We have seen rental demand on realestate.com.au remain strong in NSW, and it is likely people needing to move will continue to be able to find new rentals despite the lockdown.

If Sydney is able to get on top of this outbreak and lift lockdown before spring, it’s likely we’ll see hot conditions as the market makes up for lost time. More stock will come onto the market, sales will increase rapidly, and price rises will recommence. At this stage, it is unlikely the lockdown will have long-term impacts on the market.

Paul Ryan is an economist with realestate.com.au