As social distancing rules keep us indoors, and many out of employment, property markets across the country have taken a hit, with Brisbane house prices projected to take a hit of up to 10 per cent over the next six months.
According to CommSec, the Commonwealth Bank of Australia’s (CBA) stockbroking and financial advice arm, the plunge in economic activity due to the prolonged shutdown will begin to trickle down to property prices, which goes against the 6.1 per cent price growth in property prices that CommSec projected for 2020 late last year. Analysts from CommSec said property market activity is anticipated to shrink considerably, with enforced border shutdowns likely to impact foreign investment and international migration.
“The usual underlying demand pulse from net overseas migration has evaporated because the border is shut,” a CommSec spokesperson said. “New lending is expected to contract, buyer expectations have adjusted downwards from exuberance to pessimism, rents are likely to fall, auction clearance rates are expected to remain weak and turnover will be lower than usual.
“The net result means that price declines are inevitable.”
However, Michael Yardney, one of Australia’s leading experts in the psychology of success and wealth creation through property, predicts that the impact won’t be quite as significant.
“Transaction levels are likely to be significantly impacted over the next two months, particularly with restrictions in place limiting people’s ability to leave their homes,” he said. “But this doesn’t mean property values will plummet.”
Yardney said that we could look to China for an indication of how the property market will be affected, where property transactions were at or around zero for the three weeks following movement restrictions and have since (two months later) recovered to 50 per cent of their four-year average.
“So while property values may fall a little in the next few months, that won’t really be a reflection of their “intrinsic value” but more a reflection of the market lockdown,” he said. “And sooner rather than later we’ll come to a point where property transactions and prices will reflect the fundamentals of the Australian economy, as opposed to the current structural changes taking place.”
He pointed out that while it is understandable that many Australians expect the property markets to behave like they did during previous economic downturns such as the Global Financial Crisis in 2008, this downturn is not financially-lead, but rather a medical problem that morphed in an economic issue because of a short-term shutdown of our economy, so the fall-out should be less significant.
“Based on the predicted pace of the post-recession recovery, I would expect the pandemic to have a more limited and shorter-lived impact on house prices than either the early-1990s recession or the Global Financial Crisis,” he said.
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