One of Australia’s biggest banks is forecasting a double-digit plunge in Australian property prices as coronavirus sparks a recession and causes immigration to dry up.
National Australia Bank predicted capital city house prices would fall by 10 to 15 per cent during the next 12 to 18 months, as unemployment hit levels unseen since the 1930s Great Depression.
National Australia Bank predicted capital city house prices would fall by 10 to 15 per cent during the next 12 to 18 months. It saw Sydney’s median apartment price diving by 12.8 per cent by 2021. Pictured is a Coogee unit block on Anzac Day, 2020
‘While both the depth and duration of the downturn underway remain uncertain – and will depend on the evolution of the spread of COVID-19 – we expect a sharp fall in economic activity in the near-term, followed by a rebound in growth but slower recovery in activity levels,’ he said.
‘We expect dwelling prices to fall by around 10 per cent this year and decline further in the first half of 2021 before levelling off.
‘The declines will be led by Sydney and Melbourne – but the other cities will not be immune to rising unemployment and slower wage growth.’
Sydney’s median unit price was expected to plummet by 8.8 per cent in 2020 followed by another four per cent next year.
That would see mid-point prices for an apartment dive by 12.8 per cent, or $99,576, to $678,364, going by CoreLogic data.
Melbourne was expected to take even more of a hit, with its median apartment prices tipped to plummet this year by 10 per cent, and by four per next year.
A 14 per cent dive by 2021 would see a typical apartment lose $82,349, compared with April 2020 median prices, to hit $505,855.
Brisbane unit prices were tipped to dive by 5.5 per cent in 2020 and by another 8.6 per cent next year.
Melbourne was expected to take even more of a hit, with its median apartment price tipped to plummet this year by 10 per cent, or $58,820 to $529,383. By 2021, NAB predicted Melbourne unit prices would dive by 14 per cent, which would see a typical apartment lose $82,349, compared with its April 2020 price, to hit $505,855. Pictured are apartments at South Melbourne that featured on The Block in 2013
A 14.1 per cent plunge by 2021 would see median apartment prices fall to just $333,918.
Adelaide was also in for a beating, with NAB expecting a 2.7 per cent drop in 2020 followed by a seven per cent fall in 2021.
CORONAVIRUS CASES IN AUSTRALIA: 6,900
New South Wales: 3,047
Western Australia: 552
South Australia: 439
Australian Capital Territory: 107
Northern Territory: 29
TOTAL CASES: 6,900
A 9.7 per cent fall by next year would see median unit prices fall to $301,819.
Australia’s net immigration levels are set to plunge to very low levels, after almost a decade of 200,000 permanent arrivals every year.
NAB expected this to dampen demand for property.
‘While we do not see a fundamental over-supply in the market with construction continuing to decline, a slowing in migration will see demand for housing soften somewhat,’ it said.
Before the onset of coronavirus, house prices in Sydney and Melbourne had recovered since mid-2019, following a two-year slump sparked by an Australian Prudential Regulation Authority crackdown on investor and interest-only loans.
During the past year alone, Sydney’s median house price has surged 15.8 per cent to $1.026million while Melbourne’s equivalent values have soared 12.8 per cent to $818,806, CoreLogic figures for April showed.
‘There was evidence of a pre-COVID pickup in momentum. However, price growth has slowed more recently and activity in the established housing market has slowed sharply, ‘ NAB said.
Brisbane unit prices were tipped to dive by 5.5 per cent in 2020 and by another 8.6 per cent next year. A 14.1 per cent plunge by 2021 would see median apartment prices fall to just $333,918. Pictured is Brisbane’s city centre
Since bottoming out in July 2019, Sydney’s median house price has surged by 19 per cent from $864,993 to $1,026,418 last month, CoreLogic data showed.
Apartments weather coronavirus crisis so far
Sydney: UP 0.6 per cent to $777,940
Melbourne: UP 0.1 per cent to $588,204
Brisbane: UP 0.5 per cent to $388,729
Adelaide: UP 0.7 per cent to $334,240
Perth: DOWN 0.2 per cent to $359,306
Hobart: UP 0.5 per cent to $404,021
Darwin: UP 3.1 per cent to $286,248
Canberra: DOWN 0.4 per cent to $445,169
Source: CoreLogic Home Value Index showing movements in median apartment prices in April
This followed a record 17.6 per cent fall, after the market had peaked in mid-2017, in response to the new APRA rules.
By comparison, Melbourne’s median house price has grown by 16 per cent since bottoming out at $708,523 in May 2019.
Mid-point values for a detached home reached $819,611 in March 2020.
NAB isn’t the only bank fearing a property market plunge, with Westpac chief executive Peter King this week telling investors a property market recovery that began in mid-2019 would be unwound because of coronavirus.
‘House prices are expected to fall through the remainder of 2020, reversing the recent recoveries, particularly in Sydney and Melbourne,’ he told the Australian Securities Exchange on Monday.
Nonetheless, NAB wasn’t as worried about Sydney house prices, predicting a 2.9 per cent slump in 2020 followed by a 3.6 per cent downturn next year.
Adelaide was also in for a beating, with NAB expecting a 2.7 per cent drop in 2020 followed by a seven per cent fall in 2021. A 9.7 per cent fall by next year would see median unit prices fall to $301,819. Pictured is an aerial view of Adelaide’s city centre
A 6.5 per cent drop by 2021 would see Sydney’s median house price fall under the $1million mark to $9659,700 – taking it back to the levels of late 2019.
How COVID-19 has affected house prices
Melbourne: DOWN 0.4 per cent to $818,806
Sydney: UP 0.3 per cent to $1,026,418
Brisbane: UP 0.3 per cent to $558,372
Adelaide: UP 0.4 per cent to $476,249
Perth: UP 0.3 per cent to $465,521
Hobart: DOWN 0.2 per cent to $512,688
Darwin: UP 1.1 per cent to $473,984
Canberra: UP 0.1 per cent to $702,861
Source: CoreLogic Home Value Index for April based on median house price changes
Starr Partners chief executive Doug Driscoll, who sells real estate in Sydney, told Daily Mail Australia apartments were likely to take more of a hit from COVID-19 as investor landlords struggled to find tenants, following a drop in international students.
‘If we’re seeing a bit of a “rental crisis” – a lot of that is caused by things like students,’ he said.
‘If we’ve got fewer overseas students at the moment, then there are fewer people to rent properties and that has an impact on vacancy rates.’
Sydney’s auction clearance rate halved from 76.6 per cent in early March to 33.8 per cent in the week ending on April 19, a point acknowledged by NAB.
‘Auction clearance rates have fallen to low levels and turnover has fallen away,’ it said.
In another ominous sign, NAB is expecting Australia’s jobless rate to surge from 5.2 per cent in March, before the shutdown of non-essential businesses, to 11.7 per cent by the end of June – a level unseen since the 1930s Great Depression.
NAB is even gloomier than the Reserve Bank of Australia and Treasury, which are forecasting a 10 per cent unemployment rate by the middle of 2020, as COVID-19 measures caused the jobless level to hit the double digits for the first time since early 1994.
NAB, Australia’s biggest business lender, surveyed 320 property market players in the March quarter of 2020.
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