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."
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Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) owner-occupied 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. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.
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."
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 2020. 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 2020) 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, Performance Drive 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.
*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may inﬂuence the cost of the loan.
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