COVID-19 has impacted every industry and in this post we hear from RoZetta Institute Industrial PhD Candidate, Michael Lindsay, on his take on the impact of COVID-19 on the Australian Property Sector.
The hit from COVID-19 to Sydney’s residential property market has been two-fold. One is broad economic based as closures and other rules have stopped or slowed businesses. The other is from changes to market arrangements announced by the Prime Minister: no more open houses or public auctions. It’s the latter that appears to have had the most dramatic impact. The market has tried to adapt, including by moving auctions online. However, since the changes implemented 2 weeks ago, auction clearance rates in Sydney have tumbled to beneath the lows of the 2018/19 housing slump when it seemed banks had forgotten how to lend and government didn’t want them to anyway.
This turnaround has been more stark given it followed a recent sharp up move. The Sydney market recovery was a slow burn for much of 2019, before starting a canter at year end. It didn’t skip a beat over Christmas and was in full gallop when locals started thinking to take note of COVID-19. This is born out in ABS loan data, which showed year on year growth in new housing loan commitments positive in November for the first time in two years. In January, the latest month for which data is available, year on year growth was at its highest in more than six years.
Then COVID-19 started affecting the economy, and on 24 March social distancing requirements meant a stop to long lived market arrangements in residential real estate. To a market growing increasingly uncertain in the face of rising economic challenges, these changes were almost blinding. Sellers didn’t know what to do. Half pulled their auctions altogether, even after wearing the expense of their marketing campaigns. Most of those that didn’t pull could hold the course for so long, with almost nine of ten properties sold in the last two weekly auction cycles doing so ahead of the uncertainty of an online auction.
It’s going to be interesting to see how this plays out. It’s early days, but prices don’t appear to be tumbling, and government is stepping up massively, ‘building a bridge’ with measures such as the $130bn JobKeeper payment, alone equivalent to almost seven percent of GDP. New market arrangements have emerged and will continue to evolve. It’s now up to the market to warm to online auctions, virtual open homes, and the other elements of this new world.