What COVID-19 induced recession?
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Aug 26, 2020
What COVID-19 induced recession?
We've been told we are in recession but recent figures from SQM Research show the last 12 months for the most part has been great for house and unit prices.
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Deposit photosHobart has experienced the highest growth in house and unit values across Australia during COVID-19
The last release of the GDP figures showed the Australian economy had slipped into recession territory, but someone may have forgotten to tell the real estate industry.
Over the months since the first COVID-19 lockdown, real estate industry experts have concurred that due to the reduced number of listings and the continued high demand for property, house and unit prices have stayed steady.
However, while the volume of transactions for property has reduced, the value of homes in our capital cities has increased markedly over the past 12 months, according to the latest figures from SQM Research.
At a Glance:
- Hobart property prices increased by 12.1 per cent for houses and 26.7 per cent for units
- Melbourne prices increased by 9.3 per cent and 4.3 per cent for units
- Sydney house prices increased 6.6 per cent but reduced 2.5 per cent for units
- The overall capital city average saw a 6.5 per cent rise for houses but units stayed the same.
Coming in with the largest increase across Australia for residential property prices is Hobart with a whopping 26.7 per cent for units and 12.1 per cent for houses.
Mandy Wellings, president of REIT told WILLIAMS MEDIA the Hobart market prior to COVID-19 was buoyant and very active.
"The sales market was considerably reflective of a seller's market," said Ms Wellings.
"Once again a stock shortage and land shortage was the main reason for this.
"ROR on investment properties in many suburbs had proven most attractive to investors which assisted in creating this very buoyant market place.
"Our market was comfortably on the rise prior to COVID and we expected it to stay that way, primarily due to the substantial shortage in both sale and rental properties.
"The increase we have experienced is considerably higher than I would have expected."
For the increase to remain sustainable Ms Welling said it depended on a few factors.
"There are so many factors at play, employment, second waves of the virus, global impacts on imports/exports," said Ms Welling.
"Each time there has been a global crisis Tasmanian real estate recognises increases in values.
The GFC, 9/11, I think the saving grace for Tasmania is our unique ability to 'close ourselves off from the world' and create a safe haven to a certain extent.
"This in turn creates a sense of security for those looking towards us.
"I am of the opinion this is what has assisted the sustainability of our industry throughout this pandemic."
Ms Welling said many of their major suburbs are still deemed affordable and commutes from outer lying suburbs respectable.
Coming second is Melbourne with 9.3 per cent increase for houses and a 4.3 per cent for units.
Source: SQM Research
The bronze medal winner is Sydney which has seen an increase in asking prices for houses of 6.6 per cent, but a 2.5 per cent decrease for units.
REINSW president Leanne Pilkington told WILLIAMS MEDIA the NSW market was strong before COVID-19 with high clearance rates, rising prices and low levels of stock but it would be hard to speculate if the same growth had happened in normal conditions.
"Prices rise when interest rates are low and demand out strips supply," said Ms Pilkington.
"Would more people have decided to put their homes on the market without COVID? Probably, however, the major impact of COVID has been through Winter which is the time that fewer people typically decide to sell."
In relation to unit prices Ms Pilkington said the price drop could be attributed to two reasons.
"There are more units and they are typically undifferentiated, meaning there are more properties that are similar, and we have been plagued with issues around poor construction which means people have less confidence," said Ms Pilkington.
When asked if the house price increase was sustainable Ms Pilkington said Sydney is made up of multiple different markets experiencing differing conditions.
"But in general we expect interest rates to stay low for the foreseeable future, and for low stock levels and high demand to be maintained in the short to medium term."
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