Australian property prices have slowed for the second consecutive month, as the fallout of the coronavirus pandemic begins to weigh heavily on the market.
Property data analyst CoreLogic’s April Home Value Index revealed on Friday national dwelling prices increased by 0.3 per cent during April to a median of $557,739, down from 0.7 per cent in March.
The figures continue the property market’s recovery that stretches back to June 2019, with the annual national increase in housing prices hovering at a heady 12.3 per cent.
However, the numbers point towards a dreary outlook for the nation’s fastest-growing markets.
Melbourne property prices fell 0.3 per cent, following average growth of 1.7 per cent in the past six months, while Hobart had a 0.1 per cent decline.
CoreLogic head of research Tim Lawless said international border closures to protect Australia from the coronavirus and social distancing measures factored heavily in Melbourne’s nation-leading pricing falls.
“Sydney and Melbourne arguably show a higher risk profile … due to their large exposure to overseas migration as a source of housing demand,” Mr Lawless said.
“Along with greater exposure to the downturn in foreign students, stretched housing affordability and already low rental yields that are likely to reduce further on the back of rising vacancy rates and lower rents.”
Mr Lawless attributed Hobart’s decline to the city’s substantial proportion of workers in hospitality, arts and recreation (12.7 per cent).
Across the other capital cities, Sydney and Adelaide’s median prices rose 0.4 per cent, Brisbane’s surged 0.3 per cent, Darwin’s rocketed by 1.7 per cent, Perth’s increased by 0.2 per cent. Canberra’s flatlined at zero per cent.
Mr Lawless said the market was showing remarkable resilience in the face of the “global health and economic crisis”, with wage subsidies and the major banks’ offers of six-month mortgage holidays keeping the market afloat.
But AMP Capital chief economist Shane Oliver said 10 per cent unemployment, a halt in immigration and lowered consumer sentiment could drag down property prices by as much as 20 per cent in a worst-case scenario.
“This is looking less likely but it’s a risk,” Mr Oliver said in a note on Friday.
“If the domestic lockdown starts to be eased through this month as we expect then the fall in average property prices is likely to be around 10 per cent.
“If, alternatively, the lockdown extends beyond six months, perhaps involving a second wave of coronavirus cases after an initial easing in the lockdown, then it will overwhelm the ability of the JobKeeper program and the bank payment holiday to protect the economy and hence average home prices could fall 20 per cent or so.”
Property activity and rental prices plummet in pandemic
While property prices remain relatively insulated from the economic headwinds fuelled by the coronavirus, other market indicators are hinting that social distancing measures have spooked both buyers and sellers.
CoreLogic’s data revealed the number of settled sales fell 40 per cent during April as buyers retreated amid the volatile economy – the lowest figures in more than a decade of analysis.
The decline in housing market activity was also reflected in new advertised listings, which are 35 per cent down on 2019 numbers.
Mr Lawless said these early signs of a downturn not only spelt bad news for real estate agents, but could create complications for industries such as banking and finance as mortgage and valuation work fell.
Australia’s rental market is also shedding value, with a combination of higher rental property supply, rising vacancy rates and slowing demand leading to major falls in Sydney (down 0.7 per cent), Melbourne (0.5 per cent) and Canberra (0.7 per cent).