Property prices in Australia’s biggest cities could decline early in 2021 due to raised coronavirus restrictions, but experts predict they will strongly bounce back.
Tim Lawless, research director of property data group CoreLogic, says house prices will probably fall in the first couple of months as buyers become wary of the latest COVID-19 restrictions.
“It stands to reason that the latest coronavirus changes will dent consumer confidence and the housing market could be negatively impacted,” he said on Monday.
States and territories from December have put entry conditions on travellers, mostly those from NSW, following the Sydney virus outbreak which has led to more than 100 infections.
Some states, such as Queensland and Western Australia, have also put conditions on visitors from Victoria following coronavirus cases there.
NSW last week followed Victoria’s lead in mandating masks be worn for indoor settings in most parts of the state.
Mr Lawless said consumer confidence indices usually dipped following heightened measures.
“We can see when consumer sentiment falls, we see a similar fall in transactional (property) activity,” he said
“Buying a property is a high commitment decision and you want to be confident about your household finances, your job, and the ability to get a mortgage.”
Yet there is better long-term news for owners. Mr Lawless predicts a 10 per cent rise for the housing market this year.
Economists at AMP Capital predict a five per cent rise.
Chief economist Shane Oliver said record-low mortgage rates, economic recovery and government home buyer incentives would help demand.
Mr Oliver said risks included coronavirus lockdowns and the unwinding of government support programs such as JobKeeper, which could increase unemployment.
However there would be notable differences across parts of Australia, Mr Oliver said, as well as houses and units.
Greatly reduced levels of immigration, due to virus restrictions, are expected to lower demand particularly in Sydney and Melbourne.
Australia’s housing market increased in value in 2020, despite the drag on activity caused by the outbreak of coronavirus.
The national home value index rose three per cent over the year to a median price of $574,872, according to CoreLogic.
Values in regional areas led the way with a 6.9 per cent increase for a combined median of $420,502, compared to two per cent for major capital cities with a combined median of $651,983.
Mr Lawless said one reason for the gain in regional areas was the popularity of working from home.
The coronavirus threat has forced many workers to stay at home, and some are finding better value living elsewhere.
Living in less populated areas was another appeal of regional areas, Mr Lawless said.
“The pandemic is fresh in people’s minds and there is an appetite for low-density housing,” he said.
Melbourne was the only capital city to decline for the year – albeit on a relatively healthy median price of $682,197 – after battling two waves of COVID-19 outbreaks.
The most expensive city was Sydney, with a median value of $871,749, and the cheapest was Darwin on $416,183.
Mr Lawless said record-low borrowing rates supported the market in 2020, along with a “spectacular” rise in consumer confidence.
Confidence was buoyed in the latter months of the year as COVID-related restrictions and border constraints began to be lifted.
“Containing the spread of the virus has been critical to Australia’s economic and housing market resilience,” Mr Lawless said.
CHANGES IN CAPITAL CITY HOME VALUES IN 2020:
* Sydney – 2.7pct
* Melbourne – down 1.3pct
* Brisbane – 3.6pct
* Adelaide – 5.9pct
* Perth – 1.9pct
* Hobart – 6.1pct
* Darwin – 9pct
* Canberra – 7.5pct