australian property market

4 Reasons Why Australian Property Market Prices Will Fall

Since 2017, Australian house prices have remained stable. In 2018, it started declining but it was not an issue because there was no unemployment issue at that time and people have the purchasing power. Interest rates were reasonably high so that market crash did not have some kind of impact as most experts would have thought.

Fast forward to 2020, a pandemic combined with a recession is in full swing. More than 200,000 people have lost their jobs and the unemployment rate is more than 7%. What does all that mean for the housing market Australia?

In this article, you will learn about the reasons why Australian property market prices will decline.

1.   Unemployment

The pace at which Australians are losing their jobs is a big threat to the Australian property market. The job losses due to this pandemic are twice as much as the 1990 recession and four times as higher as compared to the 2008 recession. Even though the Australian government has launched a program to facilitate people who lost their jobs, many Australians are still struggling to make ends meet. With no money coming in, we might see people think twice about purchase real estate, which is a big investment. Sydney property market was one of the worst affected along with Melbourne as virus cases surged in these two cities.

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2.   Mortgage Finance

Another indicator of a downward trend in Australian property market is mortgage financing. We have already seen one of the biggest dips in mortgage financing in the last two decades. In late 2019 when this pandemic started, mortgage financing was it a high, but it has dipped appreciably since then and we might see this trend continue for a few more months.

3.   Auction Clearance Rates

The sharp decline in mortgage financing also does not fare well for auction clearance rates. As Australia went into lockdown, auction clearance rates nosedived in April. Even though they have bounced back and regained some ground, but it is no way near its full recovery. Additionally, some regions have not seen clearance rates rebound at the same pace as in other regions such as Victoria. Nobody can predict how long it would take for auction clearance rates to get back to late 2019 levels, but one thing is for certain it will

4.   Building Permits for New Homes

One indicator that is directly proportional to house prices is building permits. It also shows people’s interest in the building. Recent data suggests that the number of building permits has reduced significantly which is a clear indicator of a dip in home prices. This means that real estate agents might have a tough time selling real estate properties, which would slow down the real estate market.

What impact will this pandemic have on the Australian real estate market? Share your thoughts with us in the comments section below.

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