Can Australia’s property market withstand coronavirus?
Australia’s property market kicked off 2020 strongly. But will fears over COVID-19 end that?
It was full speed ahead for Australian property prices in the first two months of 2020. But will panic over COVID-19 bring an end to that?
February was yet another positive month for the Sydney and Melbourne residential markets. Sydney’s median dwelling value rose 1.7% over the month and 10.9% over the year, according to CoreLogic’s data. Melbourne wasn’t far behind, with the median price lifting 1.2% over February and 10.7% over the previous 12 months.
This means prices in Melbourne are officially back to their 2017 peak. In Sydney, they’re now just -3.7% down from it. Importantly, auction clearance rates in both cities now sit around or over 75%, usually the indicator of a hot property market.
Low interest rates have been one of the most important factors contributing to this rise. So, given the RBA cut rates again in March, you might expect in a normal world that prices would push higher still.
But the threat of coronavirus means that markets are currently far from normal. We’ve already seen panic-selling of shares on world stock exchanges and panic-buying of toilet paper in Australia’s supermarkets.
The logical question to ask is whether our property market will suffer the same fate?
In the short-term, we think there may be a pause while people wait to see what happens. In the market for new developments, this may be exacerbated by travel restrictions that are affecting the ability of overseas buyers to settle.
However, in the longer-term, once the extent of the virus is known and its effects eventually dissipate, we expect property prices to rise once again.
After all, the same dynamics of a growing population and limited housing supply still apply to our nation’s two biggest cities. And, with dwelling approvals still low and few large projects on the horizon after 2020, the same underlying factors that have pushed dwelling prices up over the past year will still be there.