As we continue to battle the economic shock of COVID-19, we’re left wondering what impact this will have on the property market.
The common predation is that house prices will go down but by how much?
While everyone has a prediction, with some predicting house price falls of up to 40 per cent as worst-case scenarios, we thought we’d look at the latest statistics.
Nationally, house prices fell just 2 per cent in the June quarter, with a 2 per cent drop in Sydney and 3.5 per cent in Melbourne, according to the Domain House Price Report.
Despite these recent falls, both Sydney (+9.8 per cent) and Melbourne (+5.9 per cent) home prices were still higher than they were in August 2019.
The drops have so far been cushioned by federal government stimulus payments and mortgage holidays on offer from lenders.
What happened to house prices in the GFC?
Let’s take a look back at what happened to house prices in the Global Financial Crisis (GFC).
During this time, Australia managed to avoid a technical recession, which by definition is two consecutive quarters of negative GDP growth. And the impacts of the crisis were mostly short and sharp.
Before the GFC interest rates were very high, some around 9per cent. For many, buying a house became too expensive and so as a result, house prices began to drop.
According to CoreLogic data, the average capital city property price fell 7.6% over 13 months from peak to trough (mid-2007 to early 2009) during the GFC.
What’s happening in Queensland currently?
According to the Real Estate Institute of Queensland (REIQ) COVID-19 interrupted positive growth across the Queensland markets, but to date, the decline in property prices has been relatively mild.
In the June quarter, the Brisbane dwelling market declined just -0.2%. Interestingly, this fall was driven by the Brisbane –Inner City region, where values fell -2.4%.
Prior to the onset of COVID-19, there were several factors pointing to positive growth across Queensland dwelling markets, particularly south-east Queensland. There has also been an increase in the number of people migrating to SEQ as the ability to work remotely increases too.
This migration increase is linked to the increase in property prices on the Sunshine Coast and Gold Coast, which saw increases in the June quarter, of 1.0% and 0.7% respectively.
What does all this mean for us now?
In the lead up to the GFC our economy was strong. Heading into COVID our economy was relatively weak.
House prices began falling in 2018. In mid-2019, the house price falls bottomed out and had started to recover in the months leading up to COVID.
The Reserve Bank cut the official cash rate three times in 2019 (June, July and October) and twice more in the same month of March 2020, which marked the first out of cycle rate cut the central bank has made since 1997.
The federal government has already announced numerous stimulus measures including the HomeBuilder scheme, but it’s too early to say what impact this could have on house prices in the future.
But at the moment, the market is stable, and people are still looking to buy as they take advantage of record-low interest rates in the range of two per cent.
Patrick Cranshaw, a Certified Mortgage Professional for over 21 years, founded North Brisbane Home Loans in 2002. His career began with ANZ Bank in New Zealand, where he progressed over 16 years to a Business Banking role in Virginia. After moving to Brisbane in 2000, Patrick led the QLD market for a home loan agency, helped set up the REMAX Real Estate Finance division, and practiced as a broker.
