Just last month, one expert named Melbourne virtually pandemic proof – but the second lockdown will likely see house prices knocked down once again.
According to fresh CoreLogic analysis, Melbourne’s housing market activity is set to be “significantly disrupted” if the last lockdown – which banned on-site auctions and open home inspections – is anything to go by.
“The previous lockdown period saw real estate agent activity across Victoria slump by almost 70 per cent before gradually improving post-Easter, with a sharp rise in activity once lockdown policies were eased around mid-May,” said CoreLogic Asia Pacific research director Tim Lawless.
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During the previous lockdown, during the mid-March and early-May period, new listing numbers across the city more than halved – but then bounced back strongly after restrictions were eased, with figures tracking 18 per cent higher in the first week July than a year prior.
But it isn’t just house prices that will be affected; Melbourne’s entire economy is set for a rough ride, according to Lawless.
“Looking forward, the six-week lockdown period will result in renewed downwards pressure on Victoria’s economy, including a worsening in labour market conditions, especially in those industries such as food and accommodation services and the arts and recreation services, that have proven to be extremely sensitive to strict social distancing measures,” he said.
Consumer sentiment – which tends to be highly correlated with housing activity – has already been dragged down thanks to the rising cases of coronavirus in Victoria, and will continue to fall amid the uncertainty created by the lockdown.
Auction results are also a sign of how the property market will perform during lockdown. In early April, clearance rates fell to just 20 per cent after tracking above 70 per cent for months before March this year.
Once restrictions were lifted, clearance rates went back to the early 60s range.
But the second lockdown will likely send these positive figures back down again.
“If the housing market’s performance through the previous lockdown is anything to go by, it’s highly likely that Melbourne property transaction activity will see a sharp drop over the next six weeks, with both a material decline in new listings as vendors lose confidence in testing the market, and a lower number of sales as buyers retreat to the sidelines” said Lawless.
But the impact on house prices will be more difficult to determine, he added. So far, the hit to home values has been mild.
Returning to reduced stock will actually help to insulate property prices from major declines as well as low interest rates, government stimulus and the major banks’ four month extensions on repayment holidays, said Lawless.
“Once the restrictions are lifted in six weeks-time there is likely to be a level of pent-up demand which will see housing activity improve, as it did when previously when social distancing measures were relaxed or lifted.”
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