What is happening in Australia’s housing market?
In the current climate of economic and social uncertainty brought about by the Covid-19 pandemic, it’s not a surprise that there have been changes in Australia’s housing market. While there has been plenty of speculation in the media, it is likely that there will continue to be change, be it big or small, for better or for worse.
In this blog, Georgia looks at some of the lead indicators and measures being introduced to support vulnerable members of our community.
Our homes are something that people are thinking more about these days – we’re spending more time in them than many of us would like or would have expected over the past few months. Housing – the supply and cost of – is and will continue to be a huge challenge through the 3 phases of “survival, stimulus and recovery” from Covid-19 for our communities. Speculation has been rife in the media, from potential support for renters to declining house prices with a wide range of opinions.
So what is happening?
Rather than add to the speculation in this post, I thought I would have a look at some of the early data we already have access to, lead metrics that are always useful in a housing context, not just in a time of crisis. Data and research from CoreLogic shows that the number of new sales and rental listings has fallen since the beginning of March, and that real estate agents are seeing a significant decrease in enquiries about listing properties. So we can say with some certainty that there has been a decline in supply in the housing market.
Auction clearance rates have also fallen in March and April. There are a number of factors at play here. Firstly people are less likely to move house if they don’t need to during these uncertain times. Secondly, inspections and auctions have moved online which could be turning off some potential buyers. We’re comfortable buying our clothes online, but perhaps not our homes just yet…
And what of all this speculation of falling house prices? Just today I’ve read three different articles predicting a 5%, 15% and 30% reduction respectively. The answer is that we’re just not sure. It is likely there will be some decrease in prices, but as to how much, only time will tell. What will be important during this period is having a baseline house price to monitor your housing market from – perhaps a figure for the December 2019 quarter. It will also be interesting to see what price points in the market see a decrease – will it be the top end, luxury properties, or will entry level houses also see a decline in prices, providing some relief to lower income households.
What about people who are already renting or have a mortgage?
Many people have been hit financially during this crisis, with many becoming unemployed, or facing reduced hours or salary reductions. While the Federal Government is providing income relief for some, there are also some additional supports for people struggling with their housing costs. For those with a mortgage, the majority of banks are offering customers a range of options to make their payments more manageable, from switching to interest only payments, redraw facilities and temporary repayment pauses.
For renters, there are a range of options on the table, differing in each state. However some of these announced support measures are yet to be legislated. That means for many tenants, negotiation with their landlords remains the best option.
The issue with these support measures is that they are currently only slated to last for 6 months. It is unknown if these measures will be extended if the current situation lasts for longer than this time period. It is likely that the recovery from Covid-19 will take longer than 6 months. If those households that are accessing these support measures for their housing costs do not see an increase in income or return to employment after this 6 month period, it is likely they will still struggle to meet their housing costs. This could potentially lead to higher rates of housing stress across Australia, an increase in tenant evictions and mortgage defaults. However, there is still time to plan for further interventions to avoid further hardship. .id are currently thinking about how we can help Local Governments monitor this.
Where to from here?
We’ll keep you updated with new housing data as it comes to hand, to assist you in navigating a rapidly changing environment. .id would also like to reiterate we are here to support our clients during this challenging time, so if you have a question about demographics, economics, housing and population, we’re here to help you. If you have a question about any of these topics, submit it here.