How is coronavirus affecting the Australian property market?
A detailed look at the property market and how real estate agents, buyers and sellers are responding to the COVID-19 pandemic.
Across the country, real estate agents are wielding hand sanitiser and experimenting with virtual inspections via video chat. Property experts are talking seriously about recession. Price falls in the short term seem inevitable.
Let's take a deeper look at all the ways COVID-19 is upending the property market. Keep in mind that the situation is changing daily. We will update this article as more data comes in.
What's going on with property prices?
Australian property prices have been rising throughout 2020. Prices have risen up or past their 2017 peaks in Sydney and Melbourne. Auction clearance rates have been ticking along in the 70% range with a decent volume of properties listed.
The coronavirus pandemic looks certain to interrupt this strong performance but there's not enough up-to-date price information to know right now.
The auction clearance rate data from last weekend was strong. Sydney recorded a rate of 74.6% listed properties sold with 749 properties up for auction. Melbourne recorded 70.1% with 1,173 properties going under the hammer (a higher number partly because the previous weekend was a long weekend).
Agents on the ground report a strong weekend too. Patrick Jamroz of Ray White Seddon had six inspections last weekend with "ten to twenty groups consistently" for each open and one auction where the property sold above the reserve.
"On Saturday we had 13 open houses and we had 255 groups of buyers come through. Super busy, a lot of people out there looking," said agent David Eastway of Hudson McHugh in Sydney's Inner West.
He said that offers and enquiries are still higher than the market's previous 2017 peak, but added "There's a shift in mentality as buyers get more aware about what's happening with the virus."
"What we're seeing now from what we're seeing less than a week ago has dramatically changed. I honestly can't tell you what next week's gonna be like."
"People are still wanting to sell," said Jamroz, looking ahead for at least the next few weekends. "The people we find that are genuinely in the market to seriously buy or sell, it's almost like coronavirus doesn't exist."
He noted that the most motivated buyers and sellers are committed to seeing transactions through, but less ready buyers may start to hold back.
Buyer's agent Cate Bakos has seen a similar trend. "Buyers really have split themselves into two camps; those who are keen to secure their property before any kind of possible shutdown, and those who are fearful of the unknown."
For Bakos it's seller sentiment that will really impact the market. "Vendors are anxious, fearful and panicked. Many are bringing auctions forward or cancelling campaigns. We can anticipate that the only sellers taking their property to market in April are those who feel the need to sell. Others who can wait it out will wait it out."
For now, scheduled auctions this weekend (21 March) look strong, with CoreLogic reporting 2,422 auctions planned across the country, up from 2,274 the weekend before.
"As new listings and launch dates are typically agreed on a few weeks in advance, it may be another week or two until we see potential impact of agents postponing launching new listings from their vendors," said Trent Muffett from Soho, a property listing and network app.
Ultimately time will tell, but it's hard to imagine large auction turnouts over the next weeks and months if the pandemic worsens.
How is the property industry responding to the crisis?
Agents across the country are taking precautionary measures as COVID-19 spreads. Open inspections are still continuing, but agents are cleaning surfaces beforehand and asking people with symptoms to stay home.
"We've been getting prepared by getting to open inspections a bit earlier, wearing gloves, wiping down surfaces and door knobs," said Jamroz. "I'm carrying a bottle of hand sanitizer at all times."
"Please do not attend our scheduled inspections for the safety of our team and the general public" read one COVID-19 notice sent out by one real estate agent in Melbourne.
Conducting business online is often hard for real estate agents, but phone and online auctions are becoming more popular as a way to minimise the chance of infection without sacrificing a sale.
Agents like David Eastway are trying out new ways to show properties to buyers without the need for physical contact. He's offering mobile or virtual tours of properties, in addition to phone or Skype consultations.
"If open homes get cancelled we're happy to do agent walkthroughs of properties while Facetiming buyers. A lot of our houses are currently empty so we can also do qualified one-on-one buyer inspections where you have the house to yourself and we'll open up everything. You don't have to touch anything."
"We can do almost everything without having to have face-to-face contact," he added, including signing contracts and agency agreements, which can all be done electronically.
Mortgage brokers are also encouraging services to go digital where possible. In its COVID-19 response plan, mortgage broker network Aussie said, "We are encouraging in-person meetings at our head and state offices to occur virtually."
Aussie is also offering hardship assistance for eligible borrowers, such as loan repayment reduction or deferment, and extension on repayment terms.
The future depends on recession, employment and stimulus
No one can say how long the pandemic will last or know the full severity of it in terms of human life and economic damage. It's a fluid and fast-changing situation. And property, unlike the stock market or supermarket shelves, responds slowly to trends or changes that rip through other industries.
If COVID-19 ends with all of us stuck in our homes for weeks, the virus's immediate effect on property prices could be minimal. The real risk to property comes from a recession induced or exacerbated by the virus. And that's starting to look increasingly likely.
In a Finder survey of leading Australian economists this week, 87% predicted a coming recession and 80% expected a dip in house prices to follow.
If the coronavirus tips Australia into recession it's likely we'll see rising unemployment and a big drop in consumer spending. We're already seeing a collapse in share markets and whole industries teetering on the edge of shutdown.
All of this will undoubtedly affect how much people are willing (or able) to pay for property.
But it isn't all doom and gloom. Historic data from the recession of the early 90s shows that Australian property prices rose during that time in most cities. Property is often seen as a safe bet in times of economic uncertainty, and people need homes more than they need shares or overseas trips.
"One of the major lessons I have learned from previous downturns is the importance of taking a long-term perspective, which always outsmarts short-term reactive thinking," said property expert Michael Yardney. He's been following the property market for 45 years and thinks that even in the likely event of recession a fall in prices will be temporary.
"It's always property fundamentals that really matter and drive our markets in the long term. Things like demographics, supply and demand, affordability, availability of finance, and local economic trends."
And moderate decline in prices would certainly make life easier for struggling first home buyers. And home loan interest rates have never been lower, making mortgage repayments cheaper.
"Serious buyers will still be in the market and could potentially get access to greater discounts due to uncertainty and possibly less buyers visiting properties," said Soho's Trent Muffett.
Of course, to get a home loan you need a stable income and a deposit saved. And that all becomes much, much harder in a recession.
- Fixed rate home loans are now the lowest rates on the market
- Every lender passing on the RBA’s surprise second March 2020 rate cut
- What’s really behind the RBA’s emergency mid-month rate cut?
- RBA makes unprecedented mid-month rate cut as coronavirus wreaks economic havoc
- RBA cash rate cuts: All the lenders passing on March rate cuts to borrowers
Other ways to save money
Are you worried about your finances during this time? Don't forget to review your bills - spending a little time on admin, could save you over the weeks and months to come.
Here are some guides on how to save some money on your daily expenses. There are plenty of things you could do, from checking your energy rates, switching to a low-interest credit card, or simply dropping parts of your insurance that you don't need.