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House prices holding their own

Updated: Oct 23, 2020

Are historically low rates keeping the property market buoyant?

Well it is official Australia has found itself in a recession.

The Australian economy fell 7% in the June quarter to be down 6.3% over the year.

Household spending is down, unemployment has risen, economic activity has slowed and general sentiment among the masses is mildly negative.

Nevertheless, and despite the above housing prices are holding relatively fair.

Understandably there are pockets of our major cities experiencing decline, such as the Sydney market, where top and middle tier houses continue to see a softer price performance while bottom tier houses and units have seen prices about stable.

So, Why are property prices not seeing the great decline as we first thought would be the case when Covid-19 was in full force?

Parts of the economy are doing well

Not every part of the economy is struggling. The mining sector is giving Western Australia and Queensland boost. As a result, Perth is seeing strong buyer demand and Queenslanders are the most confident buyers and sellers in Australia.

Banks supportive loan holders

Most banks with the ability to offer six-month mortgage payment freezes have been integral in the prevention of price declines. Although this action by the banks is due to expire this month those borrowers who have loans have either started to repay them or are making plans to do so. Those that cannot pay their mortgages will no doubt either have to look at other options including, asking for a further extension, consider changing to an interest only mortgage rate or even look at disposing the asset.

With that said, if push comes to shove there is no doubt there will be a rise in properties hitting the market. In turn we will see a rise in listings at reduced prices causing prices to dramatically fall.

Unemployment is hitting renters

Unemployment has risen and the Australian Bureau of Statistics (ABS) lists the current rate at 7.5%. Statistically younger people have been hardest hit with job losses in industries most affected including tourism and hospitality. Youth unemployment hit 20% in the last recession and it has already reached 16.4%.

Due to the job loss many unemployed youth have left the rental market. The long term rental market has already experienced an influx of property from the short-term rental market due to factors such as border control and airport closures. The knock on effect has resulted in over supply, lower demand and pricing to drop.

Employed people aren’t spending as much

For now, the majority of well-paid, white-collar professionals have escaped job losses, but the recession is making them nervous and households are currently saving nearly 20% of their disposable income, compared to 6% in the first quarter of 2020.

While people are saving more, safer conditions among well-paid job types is also good news for premium property markets. We are yet to see tough house price conditions emerging in Australia’s most expensive suburbs, with many of them continuing to see price growth through the pandemic.

Stimulus is helping

Record levels of government stimulus, such as JobKeeper, are helping keep house prices steady. While this is generally helping the unemployment rate and the stability of our banks, policies targeting home buyers such as the 5% home loan deposit scheme, state government first-home buyer incentives and the recent HomeBuilder grants are ensuring a steady flow of demand into housing.

What’s the biggest risk?

The biggest threat to house prices right now is potential withdrawal of support to home owners from the banks. Other factors that could derail the economy could include the inability for the economy to bounce back quickly, continued unemployment rises extending to more established workers and a sharp withdrawal of financial support from government.

*Information within in this publication has been sourced from


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