Property industry: Virus no threat to house prices

Australia’s property industry is playing down the threat of a coronavirus pandemic on Australia’s housing market, claiming it may only slow price growth:

An economic recession would not automatically drag the housing market into another downturn and a property bubble remains highly unlikely, property experts claim…

Realestate.com.au chief economist Nerida Consibee said a recession would have to drive an increase in unemployment to cause major shockwaves in the housing market.

The more likely scenario was a recession would sour sentiment, slowing growth in property values…

My Housing Market economist Andrew Wilson said risk averse lending from banks meant few Aussie mortgagees were highly leveraged, which would make a housing bubble unlikely.

Recent interest rate cuts would also drive more buyers into the market to capitalise on cheap credit, Mr Wilson said.

A chronic undersupply of housing in most capital cities, particularly in Sydney, along with strong population growth, further suggested pent up demand for housing, he added.

“Prices growth is being underpinned by demand over supply and that’s still the fundamental (driver) in the market,” Mr Wilson said.

SQM Research director Louis Christopher said his property analytics company was sticking to previous forecasts of double-digit rises in Sydney values this year despite coronavirus.

“Nothing has happened yet to make us revise that, but the risks are rising,” Mr Christopher said.

“It will depend how it plays out and if we see deep fear in the community, where people are not turning up for inspections or auctions.”

Buyer’s agent and market analyst Simon Pressley said in a recent Propertyology column that housing market conditions remained the best “in a decade”.

“Propertyology sees no reason for adjustment to property market forecasts that were released only a month or so prior to January’s onset of the virus,” he said.

While current momentum in the housing market is strong, Australia risks following other nations into a complete shutdown. Schools would close. Public gatherings would cease. Workers and children would be quarantined at home. Consumption spending would cease, potentially leading to widespread small business failures. Confidence would crash. And banks will see severe stress in business loans plus credit tightening.

The entire Australian economy would be severely impacted as unemployment skyrockets.

This would inevitably spillover to Australia’s housing market with virtually zero tranactions for six months.

Leith van Onselen

Comments

  1. None so blind as those who will not see…you can’t cure stupid

    So we end up with lots of Real estate agents and customers dying off. Would that count as helping affordability?

  2. Nah, if public gatherings get banned the only sensible exception would be property auctions…

    Telling Aussies to not do property is like telling them to not breathe.

  3. Coup de Whiskey

    You naysayers obviously don’t have property fever.
    Things are great in Aus and this is why so many mainland Chinese wanna own a piece of our wonderful land.

  4. Thinking a lot of deceased estates will hit the market in time for sept-oct Spring selling season.

    • More than you can imagine. And all the IPs that punters can’t service the mortgage on. And all the Chinese watching the AUS dollar plunge and in need of funds to save their ass back home. And all those Indian land bankers fleeing their debts back to the Punjab. Ugly ugly days, weeks and months are on our doorstep…

      • Coup de Whiskey

        ye of little faith! ScoMo and the RBA will rescue property prices. They always have in the past.

        Quite easy to do actually: open the gates to 750,000 migrants a yeah will be a great stimulus to the economy, and won’t hurt the surplus much either.

  5. SnappedUpSavvyMEMBER

    on line auctions, buy property from your hospital bed, govt backed mortgage repayment holidays, COVID 19 stamp duty waivers, the kitchen sink is still not even in the top 10

  6. I am having a real problem with these experts not seeing the link between forced holidays with no pay hitting large parts of our economy, and most of those taking forced holidays having massive home loans that need to be serviced. Add to that, the sectors that are already suffering without forced holidays … travel, retail, entertainment, education … there are people already losing their jobs and I bet a lot of them have home loans up to their eyeballs.

    I guess we will know the answer by the time winter arrives.

  7. “A chronic undersupply of housing in most capital cities, particularly in Sydney, along with strong population growth, further suggested pent up demand for housing, he added.”
    Mr Wilson is well and truly OFF HIS CHOPS!
    Sydney vacancy rate is near it’s 15 year high at best as this graph only goes back 15 years. https://sqmresearch.com.au/graph_vacancy.php?region=nsw%3A%3ASydney&type=c&t=1
    Add in the 1000’s of vacant Airbnb properties that are coming back on to the long term rental market, as well as a surge in deceased estates in 6 months time due to old mate Covid19. I’m thinking the undersupply may be some time off yet.

    • He’s talking about buyers and properties for sale. The number of vacant properties, whether they are available for rent or not, has no bearing on demand from *buyers* which is what pushes prices up.

      And in no way am I defending him. He is a typical RE knob with no clue but is consistently “right” for reasons he does not even know the half of.

      • He says chronic undersupply, which means a long term undersupply, not just what is on the market now. Reality is that we have been building plenty for years (although too many units in the mix), which is why rental vacancies are rising and rents have been falling. We will eventually have a chronic undersupply again if we keep importing people and the construction boom continues to collapse.

          • Depends where in Sydney. My cheeky as feck landlord kept increasing our rent. Never went down. Only got a reprieve this year when he asked if we wanted to keep rent the same. Told him we are out. Rent increases each year meant that eventually a mortgage was a better option if I was to live there long term.

    • Goldstandard1MEMBER

      OH NO!! They dusted off the “UNDER SUPPLY” play book. Except it needs stimulus.
      haha!!

  8. The property bubble started deflating in late 2018 and then the RBA and others jumped in the pump it up again.
    It was only a temporary measure as slight uptick which started in about August 2019 has run out of steam.
    In addition, the corona virus has caused much fear which is turning into panic,
    The Share market is bleeding, and the panic is spilling over into the property sector.
    We are clearly going into a recession where the unemployment rate will clearly RISE.
    This will precipitated many mortage defaults, fire sales and plunging house prices.

    The RBA/FED cavalry saved the day during the GFC; but they have used all the amunition.
    They CANNOT repeat the trick a second time.
    Buying property now is clearly dumb dumb.

      • Goldstandard1MEMBER

        Are you a property industry shill, dumb or both?

        It’s embarrassing you are still rolling out the same lines.

        • Peachy like Reusa has been correct so far. But, i suspect the uber bullishness may come undone this time due to the Corona impact. Time will tell. But expect a lot of stimulus to go toward property owners. Not right, not fair, but will be done.

      • Bright eyed Bushy Tailed W0ke

        Peachy will soon be crying into a gin tonic with desperado written all overs face lol

  9. Italy has suspended mortgage payments. That should be immediately implemented here for the indefinite future. Problem solved.

  10. banks will delay repayments but people will lose jobs so what once the forced paid holiday is over ?

  11. SoCalSurfCreeperMEMBER

    Their base case is that a recession won’t cause unemployment. That’s what recessions do.

  12. In Ireland people were still living in their mortgaged houses 7-8 years after the gfc despite not paying their mortgages as no jobs…Banks were afraid to kick people out because when they did, crowds gathered and attacked the bailiffs , police…Extend and pretend is very real unfortunately

        • Bright eyed Bushy Tailed W0ke

          Are the renters the lowest of the low in the new wonderful Australian cast system and our system is not rasist poor is poor

          • Aussie cast system is determined by number of IP’s; 0 IP’s (but title to a PPOR) means only one step above rental scum (lowest of the low with not even PPOR). Only way to get a peerage in Ausland is to have at least 1 IP, don’t you know?!

    • Prices still tanked 50% in Ireland. But I agree some got to live rent free for many years.

  13. So Nerida Conisbee doesn’t understand that unemployment rises during recessions? What…what…I mean…?? :gobsmacked emoji:

    • I suppose her thinking might be, in RE land, if you can have a fake boom, why can’t you have a fake recession? Afterall, how long since our house prices have been tethered to the actual economy and worker’s wages anyway?

  14. Undersupply is [email protected]
    Real rents are declining in most capitals to flat in Melbourne.
    Nominal rental growth is positive nationally but not in Sydney where it is negative. Across the country real rental growth is about minus 1.2%.
    These are not the conditions of under supply.

        • Down 2%-3% from all time highs…. you can’t seriously think that is meaningful.

          On $500/week rent, that’s $10….

          • Geez, come on. You were rejecting the very idea of declines. Now they don’t count because they are only down 2-3% in a game where rental yields are struggling to reach stay positive at all?

          • billygoatMEMBER

            Have to agree with peach. As a sad a$$ renter $10 a week less wouldn’t buy a pot to pi$$ in. I’ll accept rents are falling for real when the 1-2 bedder $550 – $950 per week asking price drop to $300 – $500 per week. Even better if the $hitty I renovated ones drop back to circa 1989 St Kilda prices $150 per week 2 large bedrooms plus sunroom & parking. Only then will I believe rents are faaaaallllllinggggg

          • billygoatMEMBER

            ATM Melbourne east $hit holes are overpriced at $450 and hardly any on the market. Step up to $500 – $950 and market saturated with ex Airbnb over decorated one & two bedders and properties that folk have lived in (and decorated to their unfortunate personal taste) for mandatory 12 months while collecting first homeowners grant. Realty biting but none can get real and meet the (rental) – what renters can afford to pay) market so they languish often for months on domain & realestate.com. My favourite question at openings is … where is the heater and why is this place so overpriced??????

  15. “….Recent interest rate cuts would also drive more buyers into the market to capitalise on cheap credit, Mr Wilson said…..”

    Mr Wilson will be over joyed by the number of commentators calling for interest rate cuts by the RBA and QE for Bankers.

    Perhaps the RBA could buy up the banks loan books so they can get the additional capacity working signing up food delivery dudes on temporary visas.

    Mr Wilson will just love that !

  16. So healthy people and healthy economy = house price rises
    Virus and recession = house price rises
    So healthy people and healthy economy = virus and recession
    Is that right

    • Right!
      Just like:
      Lower interest rates = higher house prices.
      Lower interest rates = greater affordability.
      Therefore,
      Higher house prices = greater affordability!

      Aussie government policy 101.

  17. Everyone needs a place to live.

    Luckily there’s nothing going around at present that suggests an increased number of people will die.