By Stephanie McLean
As the nation continues to grapple with the coronavirus crisis, experts believe the Australian property market is yet to see the full impact of the virus on property prices.
An analysis of property prices in the first five months of 2020 suggests apartments and more affordable regions have so far born the brunt of the economic downturn, while experts point to surprising resilience in inner-ring capital city markets.
“People who can afford more expensive real estate have probably not experienced the same impact as others from COVID,” said realestate.com.au’s director of economic research, Cameron Kusher.
“Everyone has lost jobs but the biggest job losses have been amongst people under 30 so typically someone under 30 is not going to be able to spend a couple of million dollars on a home, and even if people with these high-priced properties lost their jobs, there are still people who could afford to buy that property if it had to be sold,” he said.
Property markets in regions outside of capital cities where economies heavily depend on the tourism industry have weakened, while property types popular with investors, such as units in Greater Brisbane, have also seen a decline.
However, the trend is slightly murkier on a suburb level, where 12 months of data is typically required to generate enough sales to show year-on-year change. In fact, over the past 12 months many suburbs are still showing strong growth, which may be driven by amenities like schools and other lifestyle factors, or even the types of houses and units that are changing hands.
“If you look at the suburbs where prices have risen the most [over the past 12 months], particularly in Melbourne and Sydney, you’re seeing mid to top-end suburbs with quite strong growth but then equally there are other suburbs at the high end of the market that are also seeing price falls,” said Mr Kusher.
“Because turnover has fallen so sharply as lockdowns occurred and prices are a lagging indicator, it is impossible to tell quite yet the impact of COVID-19 on property prices.
“If we look at current indicators such as search and demand we can see it has rebounded swiftly showing that any price falls that occur are unlikely – at least initially- to be substantial.”
Use our latest interactive to see how median prices in your suburb have changed over the past 12 months…
Top of the pack – suburbs where prices have grown
Over past 12 months the outer Melbourne suburb of Tyabb recorded the strongest year-on-year-house price growth in the country, surging +54% to a median of $900,000.
Like all suburbs that were undervalued on the state’s Mornington Peninsula, Tyabb is now starting to see a lift because people are moving to those locations for lifestyle, said director of McEwing & Partners – Mornington, Dean Phillips.
“There are still properties that you can buy on smaller parcels of land closer to the little Tyabb village, which in all reality doesn’t offer a huge amount of lifestyle but it is very close to more desirable areas on the Mornington Peninsula,” Mr Phillips said.
Mr Phillips added most of the recent house sales in Tyabb have been at the higher end of the market, which could have contributed to jump in the median in the 12 months to May 2020.
Six of the top 10 suburbs for house price growth in the past 12 months were in Sydney with three located in the city’s hip inner west.
Petersham came in at number two with house price growth of +33% to a median just shy of $1.7m. Haberfield rolled in at number seven with growth of +25% to a median of almost $2.2m, while trendy Erskineville took out eighth spot with +25% growth to a median just over $1.5m.
In Brisbane, the high-end suburb of Fig Tree Pocket ranked at number three for house price growth in the past 12 months, with an increase of +31% to a median of more than $1.16m. The suburb of Grange came in at number four with the median jumping +29% to $1.16m.
Comparing the top five suburbs for growth in Melbourne and Sydney there’s a clear trend toward middle ring and inner-city living.
“People are paying a premium to be close to the city in Sydney but the inner west, for example, offers a much cheaper buy-in price than going to the eastern suburbs or north shore,” Mr Kusher said.
“In Melbourne, it’s not really the blue chip areas we’re seeing [in the top five], it’s kind of middle ring suburbs like Box Hill South and Chadstone – it’s not the ultra top end of the market but it’s still the above average-priced suburbs that are seeing the strongest growth.”
There was a similar outer-suburban growth trend for unit prices in Melbourne with the suburb of Nunawading, in Melbourne’s east, recording the strongest unit price growth in the country with an increase of +54% to a median unit price of $738,000.
In a similar vein to house prices, five of the top ten suburbs for unit price growth were in Sydney including the inner-city suburbs of Bronte at number two with growth of +35% to a median unit price of more than $1.2m, while Concord was at number three with unit price growth of +34% to a median unit price of $995,000.
The suburbs leading the decline
As Mr Kusher suggested, while many of the suburbs that experienced growth in the past 12 months were high-end property markets, similar suburbs were not immune to price drops.
When looking at the suburbs where house prices declined the most in the past year, the popular suburb of Carlton, in Melbourne’s inner north, surprisingly ranked at number one with a -24% dip in the median, which is now sitting at $997,000.
Meanwhile, the exclusive suburb of Dover Heights, in Sydney’s east, came in at number three on the list with a drop of -19% to a median just above $3.5m.
Three of the top 10 suburbs where house prices fell were in Perth, including Mount Helena at number five with a -19% drop in the median to $442,000, Golden Bay with a decline of -18% to $318,000 and Shelley at number eight also with a -18% drop but a much higher median of $920,000.
For units, the western Melbourne suburb of Albion experienced the biggest fall from 12 months of sales with a drop of -42% and to a new median of $275,000.
A closer look at property price behaviour by region in 2020
Given the pandemic only took hold in mid-March this year, the 12-month snapshot of property prices at a suburb level only tells part of the story.
Carving up Australia by larger SA4 regions allows us to compare the first five months of 2020 to the same period last year.
Nine of the 10 regions where house prices grew the most were in Sydney with Ryde taking out top spot with +23.3% growth to a median of $1.7m.
South East Tasmania was the only region outside of Sydney to make the top 10 list coming it at number six with growth of +16.8% to a median of $420,500.
For units, the regions that saw price growth were more varied, but again, New South Wales regions dominated the list with five regions showing unit price growth in the first half of this year.
Tasmania’s Launceston and North East region took out top spot for unit price growth with an increase of +17% to a median unit price of $297,500.
Unit price growth in Launceston was likely reflective of people being priced out of Hobart, Mr Kusher said.
The top 10 regions for unit price growth were mostly outer suburban and regional areas where apartment supply was more limited.
In terms of the regions that experienced house price falls, the Darwin SA4 region took out number one spot with prices down -4.3%. Perth and some of the outer areas of Brisbane also came through on the list.
“Western Australia, Northern Territory and Queensland have definitely lagged behind the rest of the country in recent years so it’s as you’d expect, Mr Kusher said.
Mr Kusher said the regional median house price figures from the first half of the year indicate that higher price markets have generally seen stronger growth than lower-priced areas during COVID-19.
However, given we’re only three months into the health crisis in Australia, Mr Kusher said Australians are going to have to wait a little while longer to see the true impact of COVID-19 on the property market.
Where to now for property prices?
The property market appears to be holding fairly steady for now, despite some economists predicting that property prices would drop 10-20% as a result of COVID-19.
However, Professor Shaun Bond, from the University of Queensland’s School of Business, points out that many of the predictions made during the shutdown period were largely based on worst-case scenarios.
“I would certainly not put too much thought on the extreme negative numbers that were mentioned earlier on,” he warned.
Even so, Professor Bond said the housing market was not immune to a general economic downturn.
“We’re seeing record unemployment and a large number of job losses,” he said. “Going forward, so much depends on what happens to the economy and how quickly we move out of lockdown.
Some parts of the market are being more negatively impacted than others.
“We’re seeing pretty big reductions in rent and increases in rental vacancies in some areas due to job losses, a big downturn in foreign students and a big drop off in migration – we’re looking at those things not getting back to normal until maybe next year or the year after, so that’s probably going to lead to some financial distress for landlords [who could be forced to sell],” he said.
“If the number of [rental] vacancies continues to increase, some of those inner city areas and maybe some of the further out developments [could see price falls], so a lot will depend on the extent to which the banks are willing to work with those landlords.
“If there’s a second wave of the virus and we’re forced to wind back some of the easing of restrictions, that would obviously be bad for the economy. On the other hand, if we come up with medical treatments or a vaccine sooner than expected and that leads to the economy starting to get moving again, that would be very positive for house prices.”
Originally published as How COVID-19 is impacting property prices across Australia’s regions and suburbs
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