NOT YET!!
During Covid 19 it’s been a waiting game to see how the market reacted, and it’s been a quicker process then we all originally feared.
What we can say with some certainty is that major financial support measures from the Federal Government will reduce the likelihood of significant price falls – at least in the short-term!
Without wage subsidies in the form of JobKeeper payments, increased welfare through JobSeeker payments, and mortgage holidays from the banks, the housing market would have experienced potentially large price falls by now.
However, the stimulus has resulted in a fall in the number of property transactions taking place. While sales are still happening, it is more a case of willing buyers and sellers transacting on property as opposed to distressed sales, which can be typically seen during a recession.
House prices haven’t dropped yet, despite
various predictions!
It’s worth noting, while lenders have offered mortgage holidays in the past including during the Global Financial Crisis in 2007, welfare payment increases and wage subsidies are not typically features of economic downturns.
This reflects the fact that COVID-19 is not a financial crisis but rather a health crisis, which has stopped businesses from operating and people from going about their everyday lives.
Listings are on the rise as COVID-19 restrictions ease.
The reduced demand for properties during COVID-19 has been coupled with a reduction in an already low volume of properties listed for sale with many vendors choosing not to list homes for sale amid the pandemic.
But interestingly, since state and territory governments began lifting COVID-19 restrictions, the property market has responded with a jump in the number of new properties being advertised for sale on realestate.com.au.
From here, the challenge for the property market, assuming COVID-19 remains under control, is what happens when JobKeeper payments and mortgage holidays are removed and JobSeeker payment amounts are reduced in September.
What happens when Federal Government stimulus
run out?
Many hope that the Federal Government and lenders would take a pragmatic approach to winding-down financial support measures, particularly since a $60bn miscalculation in the cost of the JobKeeper program was announced last week.
But for now, all levels of government seem keen to re-open businesses and get the economy moving again, as they know these support measures can’t remain in place for good.
Federal Government stimulus and mortgage holidays from the banks are keeping house prices at bay for now.
A high unemployment rate won’t necessarily lead to price falls – it hasn’t in the past!
With the official cash rate at a record-low of 0.25%, the cost of servicing a mortgage debt has never been lower. This also means borrowing costs for lenders are lower, which could lead to their willingness and ability to lend more money for longer.
While it is still too early to tell if property prices are falling or will fall, the financial support that has been put in place will dramatically reduce the likelihood of significant price falls.
By Trevor Parker
(Information Courtesy of RP Data)