While the CoreLogic home value index showed the trend in housing values remained positive throughout March, recent market activity has become “less meaningful" as the unprecedented uncertainty around the COVID-19 pandemic seems likely to bring activity to a temporary halt.
Recent polling has shown that more than 60% of Australian real estate agents have seen buyer and seller enquiries fall by more than 50% over recent weeks, with the majority expecting a further drop in the coming weeks.
Further, reports generated across CoreLogic platforms, utilised by around 70% of real estate agents, have more than halved over recent weeks, foreshadowing a “substantial drop” in listings activity in the immediate future.
“We are expecting the number of residential property sales to fall dramatically over the coming months – a consequence of tanking consumer confidence, a rising jobless rate, and more cautious lending practices,” said CoreLogic head of research Tim Lawless.
“Restrictions on open homes and on-site auctions will compound the slowdown in buyer activity, as would any future policy announcements related to peripheral services such as building and pest inspections, conveyancing and furniture removals.”
Unfortunately, the lack of activity will translate into a lack of data to be gathered, making it challenging to predict the future.
“If we are correct in our expectation that housing market activity is set to temporarily plunge, we could see increased volatility and a reduction in certainty creep into housing market measurements until activity picks up," said Lawless.
“Measures of housing values and prices rely on timely updates of recently sold properties; a material slowdown in turnover is likely to create some challenges over the coming months in how we report on market conditions.”
However, while activity seems sure to slow, the impact on dwelling values remains less certain.
“Capital growth trends will be contingent on how long it takes to contain the virus, and whether additional constraints on business or personal activity are introduced,” explained Lawless.
“Considering the temporary nature of this crisis, along with unprecedented levels of government stimulus, leniency from lenders for distressed borrowers and record low interest rates, housing values are likely to more be insulated than sales activity.
“The wildcard remains the sheer uncertainty of how long this health crisis and associated economic disruption will persist.”
At this point, Lawless remains cautiously optimistic that things will turn around quickly once the crisis has been contained.
“Leniency from the banks for borrowers facing financial hardship should help to stymie the number of distressed properties hitting the market. Similarly, the massive federal and state government stimulus packages will help to support job retention and incomes,” he said.
“Also, the temporary nature of this crisis implies that most home owners will do their best to weather the storm, hoping for an eventual upside as the virus is contained and economic conditions improve.
“Once the virus is contained, we expect economic conditions to quickly improve, driving a turnaround in consumer spirits which should flow through to housing market activity," he concluded.