Skip to content

How to make sense of property price predictions

How to make sense of property price predictions

What impact has COVID-19 had on property prices? And are the dire predictions of some experts likely to come true? Price predictions are all over the place at the moment, leaving buyers and sellers understandably confused. Here’s how to make sense of the situation, and why for some people, buying now might be an excellent choice.

Why auction clearance rates aren’t a good indicator

While there has been a lot of fevered speculation about property prices during the pandemic, the Australian real estate market seems to be holding strong for now. Growth has slowed in most of the capital cities, with small price drops in Melbourne and Sydney.

The ban on auctions had a bigger impact on the east coast, where sellers are more likely to choose that selling method. CoreLogic reports a more-than-50% drop in auction clearance rates during April 2020, from around 70% to just 30.2%, setting alarm bells ringing.

However, don’t be too quick to panic. While auction clearance rates are usually strongly linked to property growth, these aren’t normal times. Usually when an auction is cancelled, it’s recorded as ‘passed in’, meaning the seller didn’t achieve their price. In this case, it’s clear that something else is happening. A lot of sellers are simply deciding to hold off for now and stay put while the global situation is unsettled. Others are simply switching to private treaty campaigns.

Price changes vary across the country

Where there are declines, they aren’t consistent across the country. Melbourne and Sydney have the most reliance on net migration levels and foreign investment in real estate — both things that have dropped off sharply and are unlikely to bounce back any time soon. Brisbane, too, is heavily reliant on Asian students, tourists and investors, which might leave it exposed.

It also depends on the economy of the region. Canberra and Adelaide, both of which employ a large percentage of public sector workers, haven’t seen the same rise in unemployment as, say, Tasmania with its greater reliance on tourism. The mining industry is relatively insulated, which helps Western Australia and the Northern Territory stay steady, while pockets of Western Sydney with a lot of hospitality workers may feel extra pain.

For some, now is the best time to buy real estate

What does this mean for you? If you’re in secure employment, now might be a fantastic time to get into the property market. First home buyers in particular can benefit from more affordable prices to finally get their foot on the ladder. Long term investors who want to buy and hold can also benefit, especially those with healthy loan-to-value ratios and income.

It’s also important to note that the fundamentals of the market haven’t really changed. We have been hit with a ‘black swan’ event — one we couldn’t have seen coming and which has caused unprecedented change.

Underneath, the Australian love of property continues unabated.

How versatile agents can get great results

In fact, agents who have stayed agile and worked with the new situation have been able to achieve some amazing results.

At Elders, we’ve pivoted to a digital space that allows us to carry on business as usual — a little bit differently.

From live-streaming walk-throughs so that potential buyers can view the property and ask questions in real time to virtual auctions, we’ve risen to the challenge. If you want to know how much your home is worth, we’ve also put virtual appraisal procedures into place to help.

There might be fewer buyers in the market, but those who are, are often highly motivated. They might have moved for work and need somewhere to live or have sold their own place prior to the downturn. For them, the drop in listings is a huge problem as there isn’t much choice.

Add in our first-class negotiation skills and a savvy seller can realise a great price – free of all the usual competition!

Future projections depend on our response to the health crisis

What will happen in the future depends on the speed of our economic recovery. A ‘v-shaped’ recovery, where restrictions are lifted throughout May and June after the shock of March and April, could see house prices rebounding before the end of the year. If there is a second wave and restrictions are prolonged, recovery could be slower. Experts disagree on how much (or whether) house prices will fall, but they all agree that the faster we get on top of the health crisis, the stronger our position will be.

At time of publication, the Australian experience with COVID-19 is one of the best in the world. We have suppressed the curve so successfully that the government is talking about lifting restrictions earlier than planned. Our testing regime is excellent, and our status as an island allows us to stay insulated from the rest of the world until there’s a vaccine. All of this supports the more optimistic model of a short, V-shaped recovery and early rebound.

While none of us know the future, the indicators are that Australia may once again be the lucky country.

Related articles from the view

Apr 16, 2020

Financial help for business, sole traders & individuals

The COVID-19 pandemic has left its mark on almost everyone. Many businesses have had to shut their doors to help ‘flatten the curve’. Employees, especially in hospitality and tourism, have seen their hours cut or been stood down altogether. For sole traders who can’t provide their services online, things are looking very precarious indeed. If…
Read more
  • General
  • Residential
  • Rural
Jul 9, 2019

First home loan deposit scheme explained

For many people, the hardest part about buying a first home is coming up with the deposit. The general requirement is that you have 20% of the purchase price saved in addition to additional costs like stamp duty and conveyancing or solicitor’s fees. Some lenders will approve loans with a smaller deposit, but there are…
Read more
  • General
  • Home Loans
  • News
May 20, 2020

Five lockdown boredom busters

As the COVID-19 pandemic continues, you wouldn’t be alone if you felt a little bored. With Australians urged to stay home except for essential trips, our own four walls have become a very familiar sight. 1. Take in some art and culture You might not be able to visit the Louvre in person any time…
Read more
  • General
  • Residential
  • Rural
Jul 4, 2019

From zero to home owner

Buying a house or a unit of your very own is high on the wish list for most adults, but it can also feel very daunting. From the moment your mind turns to real estate, there are a lot of steps to take to arrive at the moment you walk through your very own front…
Read more
  • General
  • Home Loans
  • Residential
  • Rural
Mar 26, 2020

Help for home owners during COVID-19

These are troubling times. COVID-19 has already meant large scale changes to the way we live and work, with more to come. With social distancing and shutdown orders expanding across the country, a huge number of us are worried about our economic security. Many people have already lost their jobs, especially those who work in…
Read more
  • General
  • Home Loans
  • Residential
  • Rural