Housing prices are expected to decline into 2021 if lock down continues

Housing prices are expected to decline into 2021 if lock down continues

SQM Research forecasting falls of up to 30 per cent if restrictions are extended. Louis Christopher, the founder of SQM research, has told The Business house prices will fall regardless of when restrictions are lifted from here, but the timeframe will have a major impact on the depth of a property price downturn.

Mr Christopher says a "V-shaped" recovery, "where dwelling prices fall in the June quarter but start to rise again in the September or December quarters" could still occur if COVID-19 cases continue to fall and restrictions are gradually lifted during May.

However, if a second wave of the virus occurs and restrictions were prolonged, he expects a "major fall" in housing prices.

"When I say major we're talking up to a 30 per cent decline over a 12-month period, with the bulk of those declines occurring in Sydney and Melbourne," he said.

"We're not saying this is definitely going to happen, it's more a warning that if we were to see the restrictions with us for the full six months at their current levels, this is what would happen."

As job losses, stand-downs and subsequent drops in income mount, and the Reserve Bank governor warns of the worst economic contraction since the 1930s, Eliza Owen from CoreLogic says it "seems hard to digest" how property prices are yet to tank.

To date, the price falls are yet to materialise but growth has slowed — CoreLogic's daily dwelling value index puts the change in dwelling values at +0.4 per cent over the past four weeks.

Ms Owen expects the mortgage repayment holidays offered by the major banks are delaying the onset of the price declines, as is the very low volume of properties being listed for sale.

"The only people listing their property in the current climate may be those who need to sell because paying off a mortgage is no longer affordable. But the number of people in this situation is minimised by a break in mortgage repayments," she said.

"A true test for property values may come once these 'holiday periods' end.

Mortgage stress levels among Australians have continued to soar amid the global outbreak of COVID-19, with data showing more than 1.4 million Australian households are now in mortgage stress and almost 100,000 could soon default on their loans.

The latest data from Digital Finance Analytics (DFA), based on its rolling household surveys, reveal that to the end of May, the percentage of households in mortgage stress reached 37.5 per cent, which equates to 1.42 million households.  For many “JobKeeper” had not been a full replacement of their usual income and the financial stress is beginning to show.

Stress is not limited to the metropolitan capitals. The highest proportions of household stress are in Tasmania. Households with low incomes and strong rises in rental prices.  If there is anything good that comes out of this disaster it will be a price correction which will be a relief for those who were already struggling to keep up with the speed of the recent rental increases.