Australian housing prices remain volatile with unpredictable changes brought about by the pandemic – with some showing signs of recovery and stability. Cities like Sydney and Melbourne who used to enjoy an influx of migrants per year are especially hit by price falls due to lack of demand and no significant change in population. In contrast, regional housing prices are showing signs of stability, with some even enjoying slight price improvements. This due in part to the normalisation of work from home, making properties away from the city and nearer to nature more attractive.
What is the future of Australian housing prices post pandemic?
Westpac’s Chief Economist Bill Evans and Senior Economist Matthew Hassan predicts that property prices will continue to dip in the next few months. After the initial phase of what they call “COVID shock”, they see capital city prices to gain stability by December of 2020 to March 2021. The third phase is a minor softening of prices.
“We now expect many capital city markets to be more resilient with a national fall of 5 per cent between April and June next year, distributed between: Melbourne (–12 per cent); Sydney (–5 per cent); Brisbane (–2 per cent); Perth (flat); and Adelaide (2 per cent),” the economists wrote.
The softening of prices is predicted to be followed by a two-year growth. The economists argued that this is due to a mix of the following factors:
- lower interest rates
- mild recession
- loan repayment holidays
These factors will act as price superchargers to both increase property prices in growth markets and protect current values in currently risky areas such as Melbourne.
“Of most importance is that we are much more optimistic about the pace of price appreciation over the following two years with a total expected increase of around 15 percent. The fourth phase will span at least two years when distressed loans from deferrals have worked through the system – and prices react strongly to ongoing low rates; improved affordability; a strengthening economic recovery and policy stimulus. Dwelling prices are expected to lift by 15 per cent over this two–year period.” the economists write.
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