March housing outlook

By property expert Cameron Kusher
March 2020

February 2020 has seen the recovery in the housing market continue, with higher rates of auction clearance rates, and property prices increasing. This is the ongoing trend we have seen since the middle of last year, following the Federal election and the banking regulator’s decision to relax some of the lending restrictions that were in place. Housing market conditions are improving and this is being experienced across all capital cities. Although some capital cities are still experiencing price falls, the rate of decline has generally slowed. The auction market has started the year with a bang, with high volumes of properties being taken to auction and clearance rates similar to those from late last year.

Market activity

The volume of people actively looking to purchase properties across has continued to surge in February 2020, reflective of millions more active buyers. Across each state and territory, there has been a year-on-year increase in search activity. In fact, search activity in February 2020 was up more than 20% on the previous year across each state and territory. Vendors appear to be starting to respond to the uplift in demand for properties, with new listings increasing year-on-year in NSW and Victoria; however, they remain lower across all other states and territories. While there is seemingly some movement on new listings, total properties advertised for sale are lower than they were a year ago across the board, so clear shortages of stock for sale remain. A further rise in new listings is expected over the coming months; however, at this stage, it appears that any lift in new listings will remain insufficient to cater to the growing demand. As a result of the ongoing undersupply of the stock listed for sale, the expectation is that price rises will continue.


Over the past month, we have seen the coronavirus continue to spread throughout the world. The Reserve Bank (RBA) and federal Treasury expect that the impact of the virus will trim 0.5% of economic growth in the first quarter of 2020. This could be a large enough impact to see the economy shrink over the quarter and leading to the prospects of a further fall in economic growth in the second quarter, which would mean Australia would officially be in a recession for the first time in 29 years. The RBA has already cut official interest rates by 50 basis points this month to a record low 0.25%. Both the Reserve Bank and the Federal Government have also undertaken a massive stimulus package with the aim to keep people employed and keep credit markets open as Coronavirus continues to spread.

For the housing market, participants need to be planning now for the potential impact of the coronavirus. The Coronavirus is likely to result in less demand for property, especially as the broader economic conditions and consumer confidence deteriorates. This could lead to people becoming much more concerned with potential unemployment during a recession and the ongoing decline in household wealth due to the share market slump, rather than transacting property. Property professionals are now facing a market whereby open homes and onsite auctions are banned which will make the selling process somewhat more difficult. Given this, agents should be considering other ways in which to display and sell properties, including digital open house inspections, rather than rely on large-scale public gatherings. Subsequently, they should be prepared for reducing demand for properties.

First Home Loan Deposit Scheme

The latest update on the federal government’s First Home Loan Deposit Scheme indicates that they have received, in the first two months of operation, 6,730 applications for 10,000 available spaces up until the end of this financial year. It’s clear that the demand for this scheme remains exceptionally strong and that the 10,000 spaces available over the first six months of this year are likely to be taken up sooner rather than later.

Mortgage demand

Housing finance data released last month for December 2020 showed that demand for mortgages has continued to rise. With the introduction of the First Home Loan Deposit Scheme in January 2020 and ongoing lower interest rates, which have just shifted lower, it is reasonable to expect that demand will continue to rise. Based on the latest data, new lending to owner-occupier non-first home buyers has increased by 21.4% since its low in May of 2019 and is at its highest monthly value since August 2018. New lending to owner-occupier first home buyers has increased by 38.0% from its recent low in December 2018 and is at its highest monthly value since October 2009. Finally, investor demand has risen, but more moderately than owner-occupier demand; it is up 15.5% from its May 2019 low but remains -46.1% lower than its historic peak.


Over the coming months, I would expect that property transaction volumes will decline as the overall economic performance deteriorates. This doesn’t necessarily mean that property prices will decline however, it is reasonable to expect that demand will fall especially as people stay away from public gatherings. Interest in property may actually increase, based on search activity, as people stay in their homes rather than heading outside and they potentially start considering their next property purchase.

Like the broader economy, housing will face challenges over the coming months. What is unclear is how long the Coronavirus outbreak will remain but what is very clear is the federal government and the Reserve Bank are doing whatever they can to support the economy. What is also clear is that if and when the Coronavirus passes there will be a huge amount of economic stimulus in place along with pent-up demand for housing which is likely to be positive for the market over the medium to longer term.

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