House property values remain resilient despite a downturn

Led by Melbourne and Sydney, Australia’s house prices rose in the March quarter. Prices were yet to be affected by social distancing policies during this time and thus highlighted the strength of the property market prior to this point.

With the economy now regenerating as coronavirus restrictions are lifted, as the broader confidence in the economy builds, so too should the confidence in the property market. 

Of course time will tell and recovery will be slow, but the predictions of a 35 per cent decrease in property value look to be off the mark.

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Here’s how Australia’s major cities property values performed during the March quarter.

  • Sydney grew 1.9 per cent 
  • Melbourne grew and 2.1 per cent
  • Hobart’s homes experienced a 2.4 per cent increase in value 
  • Darwin’s housing values saw growth of 0.7 per cent.
  • Perth grew by 0.6 per cent 
  • Adelaide values lifted by 0.4 per cent 
  • Canberra grew by 0.2 per cent.

When looking at house prices in particular, these grew by 2.6 per cent in Sydney and 2.3 per cent in Melbourne during the March quarter; attached dwellings rose by 0.8 per cent in Sydney and 1.5 per cent in Melbourne.

In comparison to March quarter 2019, there have been some major gains, with total values growing by 7.4 per cent.

In total, the value of Australia’s 10.5 million residential dwellings rose by $141.6 billion to $7,237.1 billion, while the mean price of residential dwellings in Australia is now $690,200.

Apparently the rise in overall value was in line with ABS expectations.

“Estimates are in line with expectations,” said ABS chief economist Bruce Hockman.

“The majority of restrictions relating to COVID-19 came into effect in late March and therefore did not have a noticeable impact on property prices in the March quarter 2020.”

What can we expect in the near term? 

There is no doubt from any corner that prices will fall in the June quarter. However, there was only a slight drop of 0.4 per cent in national house prices for May. 

Five of the eight capital city regions recorded a fall in values and this was the first month on month decline since June last year.

Source: CoreLogic

It is so far a small drop, however expectations are that on the back of continued downward economic pressure, prices will drop further. 

We know that high unemployment and persistent low wages will have a negative impact on borrowing. This is likely to dampen prices until the point where the job market improves. A reduction in immigration, will also undermine prices.

Government stimulus will wind back in September, as will borrower repayment holidays as banks lift their help measures. Without these policies, housing values could come under extra pressure, particular if economic conditions haven’t picked up by the end of the year.

And so it is expected that the next seven quarters will be softer.

However, there are positives.

Australian property has strong fundamentals

“Considering the weak economic conditions associated with the pandemic, a fall of less than half a percent in housing values over the month shows the market has remained resilient to a material correction,” CoreLogic head of research, Tim Lawless, said. 

“With restrictive policies being progressively lifted or relaxed, the downwards trajectory of housing values could be milder than first expected.”

There are other positives.

Australia is enjoying its lowest interest rate period in history.

At just 0.25 per cent, it is actually the perfect time to buy your dream home, or even an investment property.

The banks are clamouring for your money, with plenty of low interest deals on offer which InfoChoice can help you compare. For instance Reduce Home Loans is offering loans at 2.19 per cent (comparison rate 2.19 per cent), while Well Home Loans has rates as low as 2.47 per cent (comparison rate 2.39 per cent).   

You can compare a range of mortgage products here.  

Essentially, those who survived COVID-19 with jobs intact and wages unaffected are in a strong position to capitalise on these conditions.

There is currently an undersupply of stock, which is another article for a different day, but overall the fundamentals underpinning the market are strong.

The bottom line is prices will dip further, but May figures suggest the drop may not be a harsh one and we could see a return to positive numbers sooner rather than later.

This update is not financial advice. This article is general news and information.

Home Loans: The comparison rates are based on a secured loan amount of $150,000 and a term of 25 years.

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WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. Comparison rates are not calculated for revolving credit products.

The products compared in this article are chosen from a range of offers available to us and are not representative of all the products available in the market and influenced by a range of factors including interest rates, product costs and commercial and sponsorship arrangements

InfoChoice compares financial products from 145 banks, credit unions and other financial institutions in Australia. InfoChoice does not compare every product in the market. Some institutions may have a commercial partnership with InfoChoice. Rates are provided by partners and taken from financial institutions websites. We believe all information to be accurate on the date published. InfoChoice strives to update and keep information as accurate as possible.

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