By Tushar Goenka
BENGALURU (Reuters) – Australian house prices will decline this year and next as the damage from the coronavirus pandemic’s disruption to the economy lingers on, with demand wilting on higher unemployment and lower immigration, a Reuters poll showed.
So far, the coronavirus has infected over 8.2 million people worldwide, including over 7,300 people in Australia. The pandemic has almost certainly marked the onset of a recession in the A$ 2.0 trillion economy after nearly three decades of continuous economic growth.
Australian house prices were expected to decline an average 5.0% nationally this year and tumble another 3.6% next year, according to the June 10-17 Reuters poll of 13 property market analysts.
That marks a U-turn from just three months ago when house prices were predicted to rise 7.0% this year and 4.0% next.
When asked how quickly Australian housing market activity would recover to pre-COVID levels, all but two of 11 analysts said it would be gradual.
“House prices will fall materially into 2021 as demand retreats on the back of deteriorating household finances and reduced population growth as border closures reduce net migration. This will remove a major driver of housing demand and economic growth,” noted Adelaide Timbrell, economist at ANZ.
In a worst-case scenario, the median forecast of a slightly smaller sample pointed toward a 10.0% decline in prices this year and a further 8.0% slide in 2021, with forecasts ranging from -3.0% to as low as -30.0% for both years.
House prices in Sydney and Melbourne, where demand is mostly driven by overseas migrants, were forecast to fall 5.0% and 7.0% in 2020, respectively, sliding again by over 3.0% in 2021.
In Brisbane and Adelaide they were expected to fall anywhere between 0.5% and 4.0% this year and next.
When asked what would be the biggest hurdles to the country’s housing market over the coming year, all 12 analysts said lower immigration and higher unemployment.
But the Australian government has announced a slew of measures, like loan payment holidays and a A$680 million ($471 million) package to encourage eligible residents to construct or significantly renovate their homes.
The Reserve Bank of Australia has also stepped in by lowering its interest rate to a record low of 0.25%, resulting in cheaper mortgages. But demand for housing has been low.
“Government stimulus may delay this weakness, but it won’t be enough to prevent lower house prices eventually,” added ANZ’s Timbrell.
(Reporting and polling by Tushar Goenka and Vivek Mishra; Editing by Rahul Karunakar and Chizu Nomiyama)
