Yahoo Finance House prices to crash 10% due to Covid-19
Australia's residential real estate prices will tumble about 10 per cent because of the Covid-19 crisis, a new forecast has warned.
Global research house S&P Global Ratings made the prediction this week while emphasising Melbourne, which is currently suffering from a second wave of the virus, will suffer even more.
"Sydney and Melbourne are two markets that are likely to drop by more than 10 per cent," S&P sovereign ratings director Anthony Walker said in a webcast.
"But Melbourne is weaker as population growth tumbles."
Victoria's population had been expanding at 1.6 per cent a year prior to the coronavirus, according to Walker, but will only grow 0.6 per cent next year.
"It's the lowest population growth since 1917, so the housing demand from migrants is going to collapse, as well as the demand from everyone who's in the country already because of the job situation."
The closure of international borders and reduced immigration would also impact the national population growth, more than halving the rate.
"It's going to reduce the demand for housing on top of all the other conditions we see right now."
To add to the grim demand-side situation, new constructions have plummeted, which is causing stress on the supply side.
However, record low interest rates and returning expatriate Australians could somewhat offset the population growth decline, according to Walker.
Home prices have been suffering nationally for a while already.
Economist Stephen Koukoulas wrote in Yahoo Finance this week that the Federal Government is sending home values into "deep trouble".
He said with high unemployment and Covid-19 financial assistance winding down prematurely, forced sales could be a possibility when mortgage pauses end.
"Shrewd sellers may try to get in early, before the rush to sell in 2021. It will be important to monitor the number of properties listed for sale with any sharp rise likely to be a precursor for price falls," wrote Koukoulas.
"If forced selling does emerge, these price falls could be sharp."
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