A plunge in population growth may delay a rebound in Australian property prices, despite growth in the housing market in the months before the COVID-19 lockdowns.
It may take until the second half of 2021 for the property market to see a gradual recovery, property consulting firm m3property predicts, assuming a potential second coronavirus wave doesn’t happen. More notable market growth may not be seen until at least mid-2022.
A drop in population growth of about 300,000 people by the end of 2023 due to border closures and high unemployment levels is mainly to blame.
But government stimulus and a faster economic recovery may cushion any price falls until the first half of 2021, m3property expects. And if population growth doesn’t decline as much as forecast, this may also help the housing market to recover.
For now, home-buying intentions stabilised in May, according to the latest monthly Commonwealth Bank Household Spending Intentions (HSI) series.
This was due to a fall in real estate prices and low interest rates, potentially encouraging buyers to submit mortgage applications, Commonwealth Bank chief economist Stephen Halmarick said.
“This was especially the case for owner-occupiers looking to lock in low fixed rate mortgages. Online Google searches related to home buying decreased in previous months and is in line with house price falls for the month.”
The Commonwealth Bank findings align with suggestions from the Reserve Bank of Australia that economic activity in Australia has begun to recover in May, after shrinking in late March and April.
Were property prices growing before COVID-19?
While housing values dipped by 0.4 per cent in May 2020, according to the latest CoreLogic data, the market was tracking well before the pandemic hit Australian shores.
Real estate values climbed by 1.6 per cent in the three months to April 2020, according to fresh figures from the Australian Bureau of Statistics (ABS), and swelled by 7.4 per cent in the 12 months to April.
Residential property prices grew on an annual basis in all capital cities except Perth and Darwin.
A surge in house prices accounted for most of that growth, rising by 2 per cent in the March quarter and 8.1 per cent in the year to April.
Meanwhile attached dwellings, including units and townhouses, edged up by 0.7 per cent in the past quarter and 5.8 per cent over the year.
Sydney and Melbourne led the value increases, up by 1.9 per cent and 2.1 per cent respectively in the March quarter.
ABS chief economist Bruce Hockman said the numbers aligned with the bureau’s expectations.
“The majority of restrictions relating to COVID-19 came into effect in late March and therefore did not have a noticeable impact on property prices in the March quarter 2020,” he said.
Residential property prices (% change Feb - Apr 2020)
House prices (% change Feb - Apr 2020)
Attached dwellings prices (% change Feb - Apr 2020)
|Weighted average of capital cities|