The coronavirus pandemic and ensuing economic downturn have been threatening to topple housing prices for months now. While the property market has proven to be quite resilient so far, new research from Domain suggests the cracks are beginning to show.
According to the report, Australian house prices fell by 2% and unit prices by 2.2% over the June quarter, the first quarter to show the impact of COVID-19. All capital cities saw drops in unit prices, while house prices fell everywhere except Adelaide, Canberra and Hobart.
Domain Senior Research Analyst, Dr Nicola Powell said improved affordability, along with the rollout of a number of government incentives, has seen buyer interest recover after falling off a cliff in April.
“The outlook for residential property has improved vastly in recent weeks. Sentiment towards housing and the purchase of a home has bucked the overall more negative sentiment around the broader economy,” she said.
June quarter property price changes
|City||House prices||Unit prices|
Of all the capital cities, Melbourne recorded the steepest drop over the quarter. While it looked set to stabilise in recent weeks, the Melbourne property market is likely to stall following the reintroduction of lockdown measures to contain the second wave of COVID-19 infections.
Sydney also saw declines, with house prices in the harbour city down by almost $23,000 and unit prices down by just over $14,000. Currently, house prices are $110,000 above the early 2019 trough but still $55,000 below their peak in mid-2017.
Only three capital cities managed to buck the overall trend and record a lift in house values. In Adelaide, house prices increased by 0.2% over the June quarter, bringing the median price to a record high of $553,036.
The Canberra property market, buoyed by a strong public sector employment base and relative success containing the virus, also saw house prices increase by 4.1% over the quarter - making it the best performing of all capital cities.
“The strong quarterly growth pushed median house values to a record high, breaking the $800,000 mark. This is also the first time Canberra house prices have pushed above the median value of the combined capitals since 2013,” said Powell.
Meanwhile, Hobart house prices rose 1.4%, despite concerns about knock-on effects from a hard-hit tourism industry. Powell points out that this is the first time house prices in Hobart have exceeded those in Perth and Darwin.
“House prices are 57.3% and units 70% higher than five years ago, providing home owners and investors the strongest capital growth of all the major capitals during this time,” said Powell.
All told, record low interest rates, unprecedented government stimulus and pauses to mortgage payments have kept urgent or distressed sales to a minimum so far, but Powell cautions that there’s still plenty of uncertainty ahead.
“While lenders have extended the mortgage pause for those under serious financial strain and the JobKeeper subsidy will be extended and tapered until the end of March next year, the outlook for prices largely depends upon how well the economy is tracking at the time stimulus ends,” she said.
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