As Australia reacted swiftly to COVID-19 in the first half of 2020, one of the first major non-human casualties was our property markets.
Throughout the first wave of lockdowns, the nation experienced a sharp decline in financial activity across the board. Most industries, and their subsequent economic activity, were hit hard. As a result, the Federal Government introduced a range of proactive support programs, including initiatives to boost job security and stabilise the housing market.
Many of our clients ask about COVID-19 and its impact on our property markets. After all, job cuts lead to mortgage stress which increases the likelihood of the liquidation of homes. Whilst this is unfortunate, it can also come as a benefit to investors who are ready to pounce on a deal.
At face value, capital city property data from CoreLogic indicates that there was only a 2.1% drop in activity over the last quarter, suggesting that for the most part, capital cities as a whole have been spared major falls from COVID-19.
However, when we dig into individual regions using this analysis from Eliza Owen, head Of Residential Research Australia for Corelogic, we find that some areas have declined more aggressively than others. Let’s take a look at them…
Perth Property Pain
Prior to the onset of COVID, the Perth property market appeared to be heading into a growth phase after nearly five years of price declines. However, the biggest property market loser early on in the COVID crisis was Mandurah in Western Australia.
The South-East of Perth was also another region that was hit hard early on. This segment of the market saw price falls on the back of a lack of new international arrivals (which was forced to decline when immigration ceased during lockdowns).
High-End Property Market Falls
Many of the other largest falls occurred in the higher-end markets of Sydney and Melbourne. These markets were impacted most severely by the ban on in-person auctions. During the first wave, Melbourne was one of the hardest hit, with values of the upper quartile down -1.6% in May alone (when lockdown measures where in full swing), while Sydney’s top-end properties were -0.6% lower.
Ms. Owen notes that ‘the more expensive parts of the Sydney and Melbourne dwelling markets have higher levels of volatility, and are at times a ‘first mover’ when it comes to the direction of price change.’
At the same time, the inner-city apartment markets of Sydney and Melbourne have also been equally hard-hit. Inner-city markets rely heavily on both international students and many tourism and hospitality workers.
With both sectors heavily influenced by international migration and travel, we are already hearing plenty of stories about soaring vacancy rates and downward pressure on prices.
Suburb Level Falls
During the first lockdown in Melbourne, Malvern East was the hardest hit suburb, recording a fall in property values of -4.8%, according to CoreLogic.
It was a similar story for a number of other suburbs in Melbourne including Brunswick East (-3.1%), Port Melbourne (-3.2%), Northcote (-3.5%), and Glen Iris (-3.8%).
Many of the inner-city suburbs of Sydney that had been very strong at the end of 2019 also faired poorly in the early part of 2020. These suburbs include Wentworth Point (-1.4%), Leichhardt (-1.7%), Manly (-2.3%), Lane Cove North (-2.4%) and Mosman (-2.5%).
Weakness to Continue
The fall in property market prices across Australia have so far been limited, however, Ms Owen points out that the trend is likely to continue for the rest of 2020.
Property markets are likely to reach a tipping point in the coming months, when both the JobSeeker and JobKeeper programs begin to be tapered, and whilst mortgage holidays will also be coming under review.
The Melbourne market—which has so far been the hardest hit by the second wave of COVID-19 and the subsequent lockdown—will also continue to struggle in the months ahead.
As we’ve seen so far from the various markets across the country, not all areas of suburbs are being impacted equally. With record low interest rates, this presents an opportunity for investors with many markets still expected to see growth in the months and years ahead.
Complete numbers are below:
Early Property Market Falls – CoreLogic
|Capital City Region||SA4 Region||Change in dwelling market values – 31st of March to 31st of May|
|Greater Melbourne||Melbourne – Inner South||-2.2%|
|Greater Melbourne||Melbourne – Inner||-1.8%|
|Greater Melbourne||Melbourne – Inner East||-1.8%|
|Greater Perth||Perth – South East||-1.2%|
|Greater Melbourne||Melbourne – Outer East||-1.2%|
|Greater Sydney||Sydney – North Sydney and Hornsby||-0.7%|
|Greater Sydney||Sydney – Inner West||-0.7%|
|Greater Sydney||Sydney – Northern Beaches||-0.7%|
|Greater Melbourne||Melbourne – North East||-0.6%|
The data in this article was sourced from here: https://propertyupdate.com.au/heres-where-the-biggest-property-price-falls-have-been-since-the-onset-of-covid-19/
Please note, the numbers and assumptions listed in this article are for educational purposes only. Individuals should seek specific advice pertaining to their unique situation and the real estate market before making any decisions.
Trilogy Funding Two is a corporate credit representative (Representative Number 506131) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237)