Property sees “rush to sell”…too late

The AFR says 20% falls in the offing:

Dr Oliver said his base case was for an increase in unemployment to 7.5 per cent that would prompt a 5 per cent decline in property prices before a bounce back. But it could be worse, he warned.

“A sharp rise in unemployment to say 10 per cent or beyond risks resulting in a spike in debt servicing problems, forced sales and sharply falling prices,” he said.

“This could then feed back to weaken the broader economy as falling home prices lead to less spending and a further rise in unemployment and more defaults and so on. This scenario could see prices fall 20 per cent or so.”

More at The Guardian:

…market experts have begun to report a rush to sell amid the mounting crisis. Tom Panos, a Sydney auctioneer, said he had noticed more vendors rushing to “cash out”.

His view was supported by buyer’s agent Pete Wargent, who said he had noticed investors with multiple properties were looking to sell. But he thinks transactions are about to “drop off a cliff” in the lockdown.

“The reality is that monetary stimulus won’t help the housing market. Confidence in the property market is now very low, as is consumer confidence generally, and until that recovers we won’t see many transactions.

20% sounds like a reasonble number over the next year. It’s beyond that that worries me. How will property prices recover when:

  • immigration remains low and under extreme political stress;
  • ditto tourism and international students;
  • property supply shunts higher with decesaed elderly;
  • households turn to a higher savings buffer guaranteeing weak consumption for years;
  • banks are capital contrained and chewing through historical bad debts, and
  • the historic income recession rolls on China accelerates into Japanifaction.

Sure, there’ll be stimulus. But this is an environment of L-shaped recovery, deleveraging, chronically high unemployment and low domestic demand.

Like Perth post mining boom, national property prices could see large initial falls during the virus then bleed lower in real price falls for years afterwards during the elusive “recovery”.

David Llewellyn-Smith
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