Property market trends: What can we expect from the rest of 2020?

The dual shock of the coronavirus pandemic and the economic downturn has left industries reeling and the government scrambling to keep everyone afloat. But in typical Australian fashion, interest in the property market has hardly waned. 

Right now, there are a few big questions on everyone’s mind. Are property prices going to drop? Can interest rates get any lower? What will happen when the government support is finally tapered off? 

While there’s a fair share of uncertainty underpinning all that’s going on at the moment, a few trends have emerged which give us some sense of where the property market is heading. We’ve compiled a few need-to-knows below.

Low interest rates here to stay

Since the Reserve Bank made the out-of-cycle decision to cut the cash rate to 0.25% back in March, the Board has been very clear that interest rates will remain at their current settings so long as unemployment is elevated and inflation remains below target. 

So what does this mean for home loan rates? Currently, they’re at the lowest levels they’ve ever been. Some lenders have even brought headline rates below the 2% mark, as in the case of HomeStar and The following graph provides a historical overview, comparing average home loan rates by type. 

In normal circumstances, low home loan rates would see more people flocking to the market, competition would increase and property prices would resume their usual meteoric rise. But things can be described as anything but normal at the moment. 

Yes, banks are currently offering the cheapest interest rates on record, but we’re also in the midst of a recession. Low rates may have given existing mortgage holders some much-needed breathing room, but are they enticing new buyers? Well…

First homebuyers primed to make a move

Recently, the NSW Government announced it will be scrapping stamp duty for first homebuyers purchasing newly-built homes worth up to $800,000, and offering tapered discounts on new properties worth up to $1 million. 

This complements the Government’s HomeBuilder scheme, which gives $25,000 to Australians planning to purchase new builds valued at under $750,000, and the First Home Owners Grant, a longstanding national scheme that subsidises the purchase or construction of new homes.

Throw into the mix the First Home Loan Deposit Scheme, which gives first homebuyers a chance to get on the property ladder with a deposit of as little as 5%, and young Australians have no shortage of help available to them.

According to property research firm CoreLogic, incentives like these usually produce a ‘vacuum’ effect, in which a large but short-lived spike in first homebuyer activity occurs as those who were already looking to buy decide to take the plunge. Considering the 12 month shelf life of the stamp duty exemption in NSW, we could see this effect exacerbated in the near-term.

Property prices beginning to dip

While the property market is looking pretty stable compared to other sectors of the economy, it bears remembering that the Government has unleashed an unprecedented amount of stimulus to prop it up. 

Mortgage deferral policies, which were recently extended for another three months, have also helped keep urgent and distressed sales to a minimum, further insulating the market against significant price drops.

Nonetheless, there have been signs that property prices are on their way down. According to research from Domain, Australian house prices fell by 2% and unit prices fell by 2.2% over the June quarter - the first quarter to show the impact of COVID-19. Among capital cities, Melbourne saw the steepest declines, with houses down 3.5% and units down 1.7%.

But not all capital cities have been so vulnerable. The Canberra property market, buoyed by a robust public sector employment base, saw house prices increase by 4.1% over the June quarter, while house prices in Hobart and Adelaide saw modest growth of 1.4% and 0.2%, respectively.

National rents on their way down

Even before the pandemic turned the economy on its head, growth in the rental market was fairly weak. In the five years to June 2020, the median national rent increased just 1.1% — hardly keeping pace with the growth in general cost of living for most Australian households. 

When investors withdrew from the market earlier in the year and the supply of new rental properties began to dry up, many believed that rents would finally recover. But the coronavirus pandemic has reversed that forecast. 

Instead, rents across Australia are steadily dropping, and the expectation is that this trend will continue in the coming months. According to CoreLogic, national rents fell 0.3% in June and 0.5% over the June quarter, marking the largest quarterly decrease since September 2018.

Median asking rents across capital cities

Lenders thinking outside the box to attract borrowers

With lenders cutting rates left and right, it can be easy to forget that there’s a floor to how low mortgage rates can go. While there may be some more room for lenders to budge, there’s a good chance they’ll begin looking beyond pricing and devising new ways to attract borrowers.

One trend we’ve noticed is the increasing popularity of cashback deals. These are one-off sums (usually between $1,000 or $4,000) paid out to customers by lenders, and can be put towards your mortgage or used for any other purpose you wish.

Other lenders have gone down more unconventional paths. One prime example is St.George, which reduced Lenders Mortgage Insurance to just $1 for first homebuyers, so long as they have a deposit of at least 15%.

So is now a good time to buy?

That depends on your personal circumstances. If you’re intent on making a move, you'll have to ask yourself a few questions. Are you on secure financial footing? Is your job at risk of disappearing? Do you really want that much debt hanging over you with everything so topsy-turvy at the moment? 

It’s a bold decision even in non-pandemic times, but if you’re confident you can service a mortgage on your current income - and are certain that your job isn't going anywhere - browse our first mortgage guide for more tips. And to get a sense of the rates currently available, visit our home loans comparison page, or browse the selection below.

Home loan comparisons on Mozo - last updated 4 March 2024

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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