Strict new measures put Australia’s property market ‘on ice’

A new suite of measures aimed at curbing the spread of coronavirus could have lasting effects on the Australian property market, with toughened restrictions banning auctions and open home inspections.

Prime Minister Scott Morrison announced on Tuesday night that auctions and inspections would be restricted from midnight Wednesday, along with a string of other strict Covid-19-related closures that extend to hair salons, tattoo parlours, food courts in shopping centres, galleries and museums, to name a few. The new restrictions also limit weddings to no more than five people, and funerals to no more than 10.

“Real estate auctions and open house inspections … that cannot continue,” Mr Morrison said.

Since the announcement, real estate agents have scrambled to put alternate measures in place, including workshopping the idea of holding auctions and inspections online. While at this stage, there is no indication about how long the restrictions will be in place, veteran finance expert Noel Whittaker said the prime minister’s move effectively put much of the property market on ice.

“Since man walked the earth, there are always going to be people who need to sell property,” he said.  “It could be because of divorce, loss of a job, because someone died, or a job transfer. There’s always gonna be property to be sold. But I would think this is the worst time to sell. It might be a great time to buy as you’ll get a bargain.”

Whittaker noted that because of the magnitude of job losses being experienced across the country, a huge amount of purchasing power has suddenly gone out of the property market. “People aren’t in a position to buy, so you’ve taken a massive amount of people out of the market,” he said. “There’s so much uncertainty, no one really knows how long this will last.”

He said it all came down to something he refers to as the ‘wealth effect’; when property and shares prices are going up, we feel wealthy and we spend more, but when they’re going down, we’re more conservative. “There’s no confidence there [and] here won’t be confidence until the market recovers,” Whittaker said.

Property data firm CoreLogic agreed that buyers and sellers were likely to hang back amid the uncertainty and economic headwinds created by coronavirus.

“This has been the outcome through historic periods of negative economic shocks,” CoreLogic said in a research note on March 19, prior to the restrictions on auctions and open houses. But a sharp rise in unemployment could see distressed housing sales increase, the firm noted, because Aussie households were typically carrying heavy mortgage burdens.

Indeed, the past weekend, even before the restrictions were introduced, saw a rise in properties being withdrawn from action, according to CoreLogic data, up from 5 per cent to 8 per cent “as vendors think twice about testing the market and buyers losing confidence or choosing to avoid public gatherings”. Meanwhile, at 61.3 per cent, preliminary clearance rates were higher than a year ago, when the market was in a price slump, but down on recent highs.

Both Whittaker and CoreLogic offered similar advice for those in the property market at present.

“The bottom line is if you’re a seller, hang on until it’s over,” Whittaker said. “If you’re a buyer, try and find a bargain. But get your finances sorted first.”

CoreLogic concurred. “For buyers who have the confidence and financial well-being to remain active in the housing market through this period of weakness, there could potentially be some good buying opportunities to secure properties at a competitive price and at ultra-low interest rates,” its March 19 note said.