“Unemployment rates have risen, lending risk has increased and there is some credit tightening in the market. The global economy, travel bans and possible restrictions on immigration would also be a dampener.”
Prices have not fallen dramatically because sales activity is low, but he suspects the slump in activity will continue for six to 12 months at least. NAB is predicting Melbourne apartment prices will fall 10 per cent this year.
Reduced population growth … will also constrain demand. This is especially the case in Sydney and Melbourne.
Felicity Emmett, ANZ
The Victorian government has yet to confirm when it will wind back restrictions introduced during the height of the coronavirus pandemic affecting on-site auctions and open homes, but NSW began easing these limits at the weekend and Queensland has followed suit.
While this change in rules will help support an increase in housing market activity from its very low levels, HSBC chief economist Paul Bloxham still expects a major drop in demand due to the shutdowns to slow the spread of the virus.
“[This is because of] sharply slowing migration, an expected sharp rise in the unemployment rate and economic uncertainty, which is likely to impact on people’s confidence about making big purchases,” Mr Bloxham said.
Real Estate Institute of Victoria president Leah Calnan, who runs a sales and property management agency in Surrey Hills, is advocating for changes in Victoria similar to those seen in other states.
“We suspect [Premier] Daniel Andrews will watch and see what happens in WA, Queensland and NSW first because we’re still seeing our infection rate turnover every day,” Ms Calnan said.
“We will be advocating for there to be some loosening of those restrictions, like returning auctions to the public arena but only letting people attend if they have the COVIDSafe app on their phone, and increasing the number of people who can attend inspections from one to five but sticking to hygiene and social-distancing processes,” she said.
Curtin University professor of economics Rachel Ong expects lifting of restrictions would help with more activity but was doubtful it would improve the market in the short term because of the bleak economic outlook and jobs market.
“The uncertainty faced by many in regard to future income flows and employment prospects will undoubtedly cause many to hesitate before engaging in property purchase, which often comes with long-term mortgage commitments,” Dr Ong said.
BIS Oxford Economics chief economist Sarah Hunter said any benefit from the easing of restrictions would be “more than outweighed” by the drag on the economy.
“We’re expecting that turnover will be very weak in the June quarter, buyers will be very cautious, and sellers are likely to wait if they can,” Ms Hunter said.
New loan commitments increased 0.2 per cent in March on latest Australian Bureau of Statistics data, but the bureau’s chief economist Bruce Hockman noted this largely reflected loan applications submitted in February and early-March before major restrictions were introduced.
“Some lending institutions reported a slowdown in new loan applications towards the end of March,” he said.
Melbourne’s vacancy rate reached 2.8 per cent in April, Domain data shows, compared to 1.6 per cent in March and 1.7 per cent the year before.
PRDnationwide chief economist Diaswati Mardiasmo said that as broader restrictions are eased and businesses repair there may be improvements across the board.
“I wouldn’t be surprised if we plateau [in the property market] in the very short term, say in the next month or so, as further easing of restrictions are introduced,” she said, adding this didn’t necessarily guarantee an increase in sales with a normalisation several more months down the track.
ANZ senior economist Felicity Emmett expects prices and construction activity to fall for the rest of 2020 and “into 2021” before recovering late next year.
“The deterioration in household income will be the biggest driver of weakness,” Ms Emmett said.
“Reduced population growth, as a result of the border closures, will also constrain demand. This is especially the case in Sydney and Melbourne, where the bulk of population growth comes from net overseas migration,” she said.
Jennifer Duke is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra.