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Buying a home

Should I consider buying a house?: COVID-19 and the property market

18 May 2020

COVID-19 has impacted 2020 in many ways – and the Australian property market is certainly one of them. But what could the next 12 months look like for those wanting to buy or sell? Suncorp’s Senior Economist Paul Brennan has some insight.

House prices could fall

When making big purchasing decisions, like a new home or investment property, job security and consumer confidence are often critical. And with both uncertain for many, we could see property prices decline.

“The rapid rise in unemployment is weighing on house prices, as evidenced by the collapse in auction clearances,” Paul said.  

“Our base case is for a 10 per cent decline in house prices before prices stabilise and then start to recover later in the year.

“This outlook is similar to other forecasts, although in a worst-case scenario for the economy some groups believe that prices could fall 20-30 per cent.”

Measures in place to limit large price drops

In good news for homeowners, Paul says the risk of very large falls in Australian house prices could be limited by a number of factors.

“Financial support measures put in place by federal and state governments should support incomes, moderating the impact of rising unemployment and shorter working hours,” he said.

“We therefore do not expect widespread forced selling of properties, required to trigger historically large falls in prices.”

In addition to this, the gradual easing of some virus containment measures could also be an aiding factor.

“Some states have already begun easing open house inspection and in-person auction restrictions, and more broadly, as business shutdowns begin to be reversed – even if partially – we would expect an improvement in consumer confidence.”

“Together with the RBA’s 50 basis point rate cuts and it’s guidance to keep interest rates at record low levels for an extended period, foot traffic and inquiry levels should begin to improve.”

But the speed at which the market recovers from COVID-19 will depend on a number of factors, including how quickly unemployment falls and when borders are reopened.

“This could be a gradual process, reflecting the combination of greater caution by lenders and less credit appetite by borrowers as a legacy of already elevated levels of household debt, and the shock to income.

“A further, longer term factor will be the timing that Australia’s borders are reopened as immigration is an important driver of house prices.”

What COVID-19 could mean for buyers

Prospective first home owners may be able to enter the market for less than they would have a couple of months ago. And for existing owners in a position to buy, lower property prices might make now the right time to consider adding to their portfolio.

Read more:

Profile of a Suncorp woman

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