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Australia's home price surge ebbs as sales hit a sinkhole
AUSTRALIAN home price growth slowed sharply in April as the country's coronavirus lockdown caused a sudden pullback in both buyers and sellers, and worse is to come as a spike in unemployment eats into incomes.
Data from property consultant CoreLogic out on Friday showed home prices across the nation rose 0.3 per cent in April, down from 0.7 per cent in March and the slowest pace since last June.
Prices were still up 8.3 per cent for the year, however, with values in the capital cities rising 9.7 per cent.
Sydney remained solid with prices up 0.4 per cent in April and 14.3 per cent for the year. Melbourne took a 0.3 per cent dip in the month, although annual growth stayed up at 12.4 per cent.
"While 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," said CoreLogic's head of research Tim Lawless.
The housing market had been one of the few bright spots in the market as booming prices added to consumer wealth. Australia's housing stock is valued at a hefty A$6.9 trillion (S$6.29 trillion).
With large chunks of the economy shut down since mid-March, unemployment is expected to double to 10 per cent by June, taking a grim toll on incomes and confidence.
The closure of Australia's borders has also cut off the flow of foreign migrants, student and tourists.
"Sydney and Melbourne arguably show a higher risk profile relative to other markets due to their large exposure to overseas migration as a source of housing demand," said Mr Lawless.
However, the mass withdrawal of many would-be sellers, partly due to a ban on home auctions, could actually prove a positive for prices.
CoreLogic estimated settled sales dived 40 per cent in April as the number of homes listed tumbled and buyers stayed away.
The number of new listings being added to the market at the end of April was tracking 35 per cent lower than a year before.
"The reduction in advertised stock levels at a time of low demand is another factor that should help to insulate housing values from a more material downturn," said Mr Lawless.
Still, the collapse in turnover is bad news for state governments that rely on sales taxes and for a range of industries from real estate agents to home ware retailers.
"A significant reduction in housing activity will also have an impact on the banking and finance sector, due to reduced mortgage-related activity, less valuation work and conveyancing," he said. REUTERS