Australia’s housing market is inevitably being impacted by social distancing measures and the market’s weaker confidence due to the coronavirus pandemic, with preliminary clearance rates taking a hit this week, falling to 61.3 per cent across its combined capital cities.
Despite the escalating health crisis and related economic fallout, the weekend experienced the second busiest for auction activity to date this year. Figures show 2,539 homes were taken to auction across Australia’s combined capital cities.
The preliminary auction clearance rate of 61.3 per cent is up on a year ago when home values were falling, but the impact of Covid-19 has begun to be felt.
Corelogic described this week’s preliminary auction results as “marking a turning point in buyer and seller sentiment”, with withdrawal rates rising and vendors thinking twice about testing the market as buyers lose confidence or choose to avoid public gatherings.
Corelogic says it’s likely that the preliminary auction clearance rate of 61.3 per cent will revise down to below 60 per cent for the first time since mid-2019 as remaining results are collected.
In comparison, the previous week saw 2,274 homes taken to auction returning a preliminary auction clearance rate of 70.6 per cent, before revising down to a final clearance rate of 65.3 per cent.
To date, Corelogic says there is no evidence of “reduced housing values”, although notes that it is clear, transactional activity will be temporarily disrupted in the coming weeks and months.
“The extent of this disruption depends on how long it takes to contain the virus and for sentiment to recover,” the data house notes.
Speaking on the housing market, AMP economist Shane Oliver said that if the recession should last more than six months – with unemployment up to 10 per cent or more, house prices could collapse by up to 20 per cent in a worst case scenario.
While social distancing is likely to delay property transactions, Oliver said AMP’s base case is for a rise in unemployment to around 7.5 per cent.
“This is likely to drive a 5 per cent or so dip in prices ahead of a property market recovery into next year as the economy bounces back and pent up demand is unleashed again helped by ultra-low interest rates,” Oliver said.
On Friday, the federal budget was postponed until October, as Scott Morrison outlined that the pandemic is likely to remain a problem for at least six months.
Morrison's $66 billion stimulus package, announced Sunday, dwarves the initial $17.5 billion economic stimulus package announced eleven days ago, in a bid to “cushion the economy” as Australia goes into social shut down.
The measures follow the Reserve Bank of Australia’s emergency cash rate cut to 0.25 per cent last week.
Canberra has also announced that both commercial and residential tenants struggling to pay rent, would receive assistance as part of the coronavirus stimulus package.
“To ensure that in hardship conditions, there would be relief that would be available, and ensuring that tenancy legislation is protecting those tenants over the next six months at least,” Morrison said on Friday.
“Everyone does have that role to play, and that will include landlords for people who are enduring real hardship.”
Morrison said that this work will be done by states and territories.
“And that work will be led by Western Australia, together with New South Wales, working with all other states and territories, to bring back some model to be applied in hardship cases.”