By Nerida Conisbee
After several months of uncertainty due to the coronavirus crisis, the Australian property market was beginning to get back on track. But precariousness in the market could return following a second round of lockdowns in Melbourne.
June was a particularly positive month for Australian property across almost every measure tracked by realestate.com.au. In fact, last month we saw some of the best conditions since the first lockdown began in mid-March.
But the return to Stage 3 restrictions in Greater Melbourne and Mitchell Shire has forced home auctions back online and open for inspections to be done by appointment only. A drop in consumer confidence could also put home buyers on the backbench, for now.
Only time will tell what the future holds for Australian property post-pandemic, but until then, we can try to map out a possible direction.
Five key trends in the COVID-19 property market
1. Buyers still active as seller activity trends upwards
The number of home buyer searches on realestate.com.au has continued to surge and is now up 72.5% from the lows experienced at the end of April.
In fact, every measure of demand captured on realestate.com.au has reflected some of the best conditions since before lockdown 1.0.
A key challenge for buyers in the past 12 to 18 months has been very few properties listed for sale, but a higher level of consumer confidence recorded in June 2020 is seeing more properties coming onto the market compared to the same time last year.
2. Distress remains low as September cliff looms
There are currently limited signs of distressed sales on realestate.com.au with only five mortgagee listings in June out of more than 160,000 listings. This is less than half the number compared to the same time last year.
However, mortgage payment freezes and other government stimulus measures will come to an end in September. The September cliff will mark the beginning of a gradual withdrawal of assistance for mortgage holders but it is likely some property markets will be more exposed than others including areas with high rental vacancy rates, or those that rely on foreign students.
3. First-home buyers remain active but investors have backed off
Enquiry levels remained strong for first-home buyers in June, more than doubling in most capital cities. We are, however, still yet to see signs of increased activity from investors.
For new developments, this strong first-home buyer demand, combined with stimulus measures such as the federal government’s HomeBuilder scheme, which excludes investors, has led to very strong demand for house and land projects. However, a drop in investor activity, both local and offshore, means off the plan developments remain muted.
4. House prices are not collapsing
Given we are currently in the midst of a recession and unemployment is rising, it’s surprising that house prices have remained steady.
In some places such as Canberra, and for some property types such as those in premium suburbs, prices are still rising. A stable banking sector, lots of government stimulus, a lack of properties to buy and a lack of alternative investments are just some of the reasons why this is the case.
5. Melbourne lockdown 2.0 could derail recovery
Property market conditions were particularly strong in June but the current surge in COVID-19 cases in Melbourne could break the city’s recovery.
For the rest of Australia, it may actually be a positive as economic activity is driven northwards. This is of course dependent on other states managing their own virus cases.
For now, the focus should be on maintaining consumer and business confidence across Australia. If this can be done, it will ensure a sharp recovery for the economy and property market.
Originally published as The five key trends in property as lockdown 2.0 puts industry on edge