Sellers drop asking prices as coronavirus economic uncertainty looms

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on April 23, 2020
Sellers drop asking prices as coronavirus economic uncertainty looms

Photo by Yashi Wang on Unsplash

Property values rose in every capital city over March but some vendors are cutting their asking prices, as economic and job uncertainty from coronavirus looms.

The rebound in the property market looks set to be cut short, according to the latest Domain Property Price Report for March 2020.

Property values continued to climb in the March quarter, but early signs suggest the rate of price growth may have peaked before the pandemic hit.

Sydney property values led the nation, with house and unit prices climbing by 2.6% and 2.7% respectively.

Hobart house prices increased 2.2% in the March quarter, followed by Melbourne's house prices up by 2.0%.

The unit market didn't fare as well. 

Apartment values fell by 8.1% in the Northern Territory, 5.2% in Canberra, 4.2% in Brisbane, and 0.4% in Melbourne.

"The coronavirus pandemic and economic shutdown altered the market mid-March," the report said.

"New listings began to fall suggesting vendors were becoming hesitant.

"This caution heightened in April with even fewer homes listed for sale, suggesting few forced sales."

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.

Lender
Advertised rate Comparison rate* Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval

VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
FixedMore details
NO UPFRONT OR ONGOING FEES

Basic Home Loan Fixed (Principal and Interest) (LVR < 70%) 3 Years

NO UPFRONT OR ONGOING FEES
FixedMore details
  • Easy, digital application process
  • Market leading app to help you pay off your loan sooner
  • No on-going fees
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.
REFINANCE IN MINUTES, NOT WEEKS

Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *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. Rates correct as of January 26, 2022. View disclaimer.

CoreLogic Head of Research Eliza Owen expressed surprise that dwelling values have remained strong.

"It seems hard to digest that property values have not plummeted," she said.

"It is still likely that property values will fall amid the downturn. But the decline in momentum across property values has been relatively mild relative to what has happened in market activity."

Domain data showed an increase in vendors dropping their asking prices as economic uncertainty looms.

In Sydney, 14% of listings had asking prices revised in March, compared with just 5% in late 2019. 

In Melbourne, asking prices were dropped on 13% of listings in March compared with just 3% late last year. 

"These early signs suggest a broader market slowdown is anticipated as vendors seek a timely sale in fear of what may be ahead," the report said. 

The report also found a 20% drop in new listings in the four weeks to mid-April compared with last year. 

"Social distancing restrictions that banned open homes and auctions will also slow buyer activity, as well as low consumer sentiment, economic uncertainty and job security fears deterring buyers," the report said.

Ms Owen said the drop in listing volumes could be sustaining property prices.

"The fact that listing volumes and seller activity is so low, and therefore available housing supply constrained, may be one factor preserving relative stability in property prices," she said.

"Another, related factor may be vendor expectations. The fact that this is a temporary, enforced downturn means that vendors might be holding onto a relatively high expectation of their property value, with a view to sell once the economy returns to full-scale production.

"That is because the only people listing their property in the current climate, may be those who need to sell, because paying off a mortgage is no longer affordable. But the number of people in this situation is minimised by a break in mortgage repayments."

She said the true test for property values may come once mortgage repayment holidays end.

"Financial regulators, the Reserve Bank and the banking sector may extend reprieve for mortgage repayments in the scenario that the economy has not made improvements within six months.

"However, even once the economy returns to a state of normalcy, some households will have unpaid interest capitalised on their loan. This increases the amount of debt held.

"For leveraged households in severe stress from the result of COVID-19, greater assistance may be required in this scenario – particularly where the government and banking system will have a far lower interest rates on debt than mortgage holders for years to come."


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. 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. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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author-avatar
Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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