How accurate were Australians' COVID house price predictions?

author-avatar By on July 31, 2020
How accurate were Australians' COVID house price predictions?

Photo by Pawan Kawan on Unsplash

Most Australians predicted property prices would fall in 2020 back in April, but a fair chunk of them were well off the mark, according to new data.

A Budget Direct survey conducted in April found the majority thought property prices would fall over the following three to six months. 

Of these, the vast majority anticipated an average fall of 20% or less, while around 13% predicted a fall of more than 20%. 

Roughly 20% of the nearly 1,000 people surveyed figured prices would rise, with 12% forecasting price rises of up to 15% and 8% forecasting rises of more than 15%.

The remaining respondents said there would be no change in property prices. 

How much do you think property prices will rise/fall over the next 3–6 months? - Australia

3-6months

Source: Budget Direct 

These predictions are somewhat in line with the predictions made by other major banks and research institutions. 

The University of Melbourne forecast a 4.4% decline in the June Quarter (end of March to end of June), followed by another 2.3% drop in the September quarter. 

Meanwhile, in May Commbank predicted a coronavirus-led house price drop of up to 30% in a worst-case scenario, while NAB also said in April house prices could drop by a cumulative 30%

ANZ also said prices could drop by up to 13% in Sydney and Melbourne through to mid-2021.

But so far, house prices have remained resilient. 

The CoreLogic Home Value Index for June showed that over the June quarter, national median dwelling values declined by just 0.8%, and despite recent falls, estimates of market activity showed a further improvement from the April low.

Indeed, capital cities like Hobart (1.0%), Adelaide (0.7%), Darwin and Canberra (0.4% and 0.7%) actually recorded quarterly dwelling price increases. 

“Whilst COVID-19 hit us swiftly this year and threw Australian economy and property markets into turmoil, things settled down within the property market quicker than initially thought," PRD Real Estate Chief Economist, Dr Diaswati Mardiasmo said

“The key going forward will be increasing levels of employment, public and private investment and consumer confidence based on the ongoing impact of COVID-19.

"This sets the scene as we walk the tightrope to full economic recovery."

Although there's still the September quarter results to come, it's looking like property prices could remain relatively stable, meaning those who predicted falls by more than 20% by September could be well off the mark. 

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner-occupiers.

Provider
Ad rate
p.a.
Comp rate*
p.a.
Monthly
repayment
 
2.59% 2.55% $1,599 Go to site
2.89% 2.89% $1,663 Go to site
Budget Home Loan OO P&I
2.68% 2.74% $1,618 Go to site

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Introductory rate products were not considered for selection. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term. Rates correct as at 03 August 2020. View disclaimer.

Property price predictions by state, age and gender 

The state-level responses were fairly consistent with the national averages, with most people across all states predicting property price falls by up to 20%. 

In terms of age, the 45-54 age group was the most bearish, as it had the highest portion of people predicting a fall in prices of more than 20%. 

The 35-44 age group had the most respondents expecting falls of up to 20%, while the 18-24 age group was the most likely to expect a property price increase of up to 15% or more than 15%. 

BD18-24

BD55-64

Source: Budget Direct 

Meanwhile, in terms of gender, women seem to be more bearish. 

Just over a third of men and nearly half of women anticipate a drop of up to 20%, while more men expected no change in house prices. 

BDgender

Source: Budget Direct 

9/10 have no intention of buying or selling anytime soon 

Around 85% of respondents said they have no intention of buying or selling property in the three to six months following April 2020. 

Of those who do intend to buy or sell, there are more buyers than sellers. 

Of those respondents who were planning to buy or sell property before COVID-19, nearly 60% intend to go through with their plans, and roughly half of those who have delayed their purchase/sale intend to wait up to 12 months now. 

About a quarter of respondents are unsure if they can afford their mortgage or rent repayments, reflecting the high levels of uncertainty COVID-19 is bringing to the economy. 

[Read: Resuming your home loan repayments after a mortgage holiday]

Do you intend to buy or sell property in the next 3–6 months?

BDbuy-sell

Source: Budget Direct 


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2019) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au and loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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author-avatar
William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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