Brighter Buying

#3 Reasons prices won’t freefall even as confidence plummets

by Kate Watt, Marketing Manager 23 April 2020

The scary headlines continued this week, with a Westpac consumer survey recording the biggest monthly fall in property market confidence in the 47-year history of the index.

Taken at face value the survey results leave readers to say just one thing: ouch.
While consumer sentiment might have entered freefall territory, the REA Group Chief Economist Nerida Conisbee says prices won’t follow.
“It is impossible to categorically declare how far property prices will fall due to COVID-19, but it’s important to remember the kind of situation we’re in, which is a health crisis resulting in productivity challenges,” she wrote recently for realestate.com.au.
“In light of that, there are a number of reasons why Australians shouldn’t expect to see house prices in freefall.”
While many Australians might expect to see a property downturn like we last saw during the 2007 Global Financial Crisis, this is a very different type of crisis – and we have a few things that will help us ride out the worst of it and recover on the other side.

  1. The banks are a “pillar of support” offering mortgage payment deferrals of up to six months, and we have record low interest rates. The Reserve Bank of Australia has also put in place cheap rates for banks to increase lending to small and medium-sized businesses.
  2. Job losses have hit many households hard, very hard. History shows us where unemployment rises, property prices decline. COVID-19 related job losses are concentrated in certain sectors, meaning those employed in other sectors are somewhat shielded.
  3. We’re seeing pandemic-related growth in several sectors, including health, government and medical research. Post pandemic, some are even forecasting a Perth mining boom as the Chinese government puts in place stimulus measures creating iron ore demand.

So while the scary times continue, and it’s impossible to say exactly what will happen, it’s important to remember this is a very different crisis to ones we’ve seen before.
Need some help with your property plans during uncertain times? Contact us for a chat.