Residential real estate is one asset class which is common to 25.5 million Australians. After all, some form of housing is an essential commodity whether you own or rent that housing, you are a participant within that investment class. National housing values increased 0.3 per cent during April despite ongoing challenges to the industry caused by COVID-19, while its only the most expensive markets that have seen negative growth.
According to the CoreLogic Home Value Index, Australian housing values have held strong throughout April, despite a sharp drop in market activity in the traditional real-estate markets due to ongoing restrictions placed on the residential sales market amid the COVID-19 pandemic. However, developers in the off plan sales environment are reporting little or no impact on pricing to date, with only some small drops in transaction activity due to social distancing regulations.
From 25 March, the government placed strict bans on open homes and on-site public auctions in order to slow the spread of the virus, forcing real estate agents to conduct private inspections exclusively and migrate all home auctions to online portals. This also caused the closure of display homes and on-site land sales offices for residential developers and new home builders.
These challenges have seen auction volumes fall, withdrawal rates skyrocket and clearance rates take a hit – but to date have had next to no impact on values.
Despite this challenging marketplace, most regions across Australia experienced minor growth in housing values in the month of April, increasing national property values by 0.3 per cent compared with March.
The 200,000+ real estate professionals across Australia are doing a fantastic job providing the essential service of buying, selling and leasing residential real-estate. With a few logistical changes, some agents and business being dragged into the world of technology they had previously ignored – it’s business as usual for agents trying to sell, list or lease real-estate.
Understandably, changes in the community surrounding our ability to move freely through society will result in less activity, and thus less transactions – however this does not and should not point to a downturn in value.
The potential for fewer buyers will be neutralised by fewer sellers. Let’s not forget that Australian real-estate already had a significant shortage of properties listed for sale before the impact of COVID-19 hit Australian shores.
In fact, for those lucky enough to have significant income security, despite values remaining quite steady, it’s a fantastic opportunity to be looking to buy or sell right now. First home buyers, upgraders, investors and even downsizers are in a strong position to take advantage of extraordinary availability of capital at record low rates..
According to CoreLogic’s index, it is the most expensive markets around the nation that are slowing the fastest, with the top quartile of each market weakening substantially compared with other subsections of the market.
Quarterly gains across the top quartile of the market reduced from 6.6 per cent in late 2019 to 2.4 per cent in the three months ending April 2020.
Further, the top quartile of capital city markets recorded a rise of just 0.1 per cent in April, compared with a 0.3 per cent increase for the “middle” of the market, and a 0.2 per cent rise across the lower quartile.
“Premium housing markets have previously been more reactive to changes in the economic environment, and this trend is once again becoming apparent.” – said Mr Lawless from CoreLogic.
However, in crisis, growth often follows. Close to 30 years ago, real-estate lead the recovery out of the 1991 recession. Despite unemployment reaching levels above 10% during that period, over the 3 year period finishing 1993, all 8 of Australia’s major cities experienced property price growth over 2%, while regional markets were significantly stronger with typical growth over 15% for the period. This real-estate lead recovery was again apparent during the 2008 GFC, with property price growth across all major Australian cities being achieved over the 3 years ending 2010.