Canberra property values hold their own during April
In the context of rapidly weakening economic conditions and the broader COVID-19 related disruption, the April housing market result looks remarkably resilient. Property values in Canberra were flat for the month, demonstrating resilience to adverse market conditions created by COVID-19.
CoreLogic head of research, Tim Lawless, said “although housing values were generally slightly positive over the month, the trend has clearly weakened since mid-to-late March, when social distancing policies were implemented and consumer sentiment started to plummet”.
“The Australian version of this global health and economic crisis is only a month-and-a-half old, and it looks inevitable that there will be some downwards pressure on housing values over the coming months. The magnitude of housing value falls depends on a broad range of factors with most hinging on the timing and extent of social distancing policies being lifted,” Lawless said.
“The good news is that Australia has managed to flatten the spread of the virus more effectively and efficiently than expected and we are already seeing a subtle easing of social distancing policies in some states. An early return of economic activity should support a lift in consumer spirits, which in turn should see housing market activity sparking back to life.”
Plenty of downside risk remains for housing values; however, there are a variety of factors that will help to insulate home values from a material downturn.
A key factor is the leniency provided to distressed borrowers affected by COVID-19 by Australian banks. Eligible borrowers can take advantage of payment holidays over a six-month window, by which time the economy will hopefully be in better shape. This policy is central to limiting the flow of distressed properties onto the market, which could have otherwise been a source of more significant downward pressure on home values.
Lawless noted that the high rate of unemployment is likely to be most impactful on areas of the workforce that have lower rates of home ownership. The potential for stronger labour market conditions amongst workers who have a higher rate of home ownership is another factor that should help to keep the number of distressed properties to a minimum.
There is also the unprecedented level of stimulus to consider, which will help to keep businesses afloat and workers in a paying job. A sharp reduction in advertised supply levels is another factor helping to safeguard home values amidst a fall in buyer demand.
“No doubt the coming month will provide more clarity about the direction of housing markets,” Lawless concluded on the April market results.
“One of the most important indicators to follow will be measures of consumer sentiment. If consumer spirits start to bounce back to more normal levels, this is when we should start to see housing activity lift from their current low levels.”
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