BENGALURU (REUTERS) - Australian house prices will decline this year and next as the damage from the coronavirus pandemic's disruption to the economy lingers on, with demand wilting on higher unemployment and lower immigration, a Reuters poll showed.
So far, the coronavirus has infected over 8.2 million people worldwide, including over 7,300 people in Australia.
The pandemic has almost certainly marked the onset of a recession in the A$2.0 trillion (S$1.9 trillion) economy after nearly three decades of continuous economic growth.
Australian house prices were expected to decline an average 5 per cent nationally this year and tumble another 3.6 per cent next year, according to the June 10 to June 17 Reuters poll of 13 property market analysts.
That marks a U-turn from just three months ago when house prices were predicted to rise 7 per cent this year and 4 per cent next.
When asked how quickly Australian housing market activity would recover to pre-Covid levels, all but two of 11 analysts said it would be gradual.
"House prices will fall materially into 2021 as demand retreats on the back of deteriorating household finances and reduced population growth as border closures reduce net migration. This will remove a major driver of housing demand and economic growth," noted Adelaide Timbrell, economist at ANZ.
In a worst-case scenario, the median forecast of a slightly smaller sample pointed toward a 10 per cent decline in prices this year and a further 8 per cent slide in 2021, with forecasts ranging from -3 per cent to as low as -30 per cent for both years.
House prices in Sydney and Melbourne, where demand is mostly driven by overseas migrants, were forecast to fall 5 per cent and 7 per cent in 2020, respectively, sliding again by over 3 per cent in 2021.
In Brisbane and Adelaide they were expected to fall anywhere between 0.5 per cent and 4 per cent this year and next.
When asked what would be the biggest hurdles to the country's housing market over the coming year, all 12 analysts said lower immigration and higher unemployment.
But the Australian government has announced a slew of measures, like loan payment holidays and a A$680 million package to encourage eligible residents to construct or significantly renovate their homes.
The Reserve Bank of Australia has also stepped in by lowering its interest rate to a record low of 0.25 per cent, resulting in cheaper mortgages.
But demand for housing has been low.
"Government stimulus may delay this weakness, but it won't be enough to prevent lower house prices eventually," added ANZ's Timbrell.
Separately, data published by international property portal Juwai IQI showed that Chinese buyer enquiries for Australian homes fell to their lowest in almost three years in May, suggesting multi-billion dollar housing demand could be another casualty of a diplomatic spat between the two countries.
Enquiries slumped by more than 65 per cent in May compared with April, when enquiries had surged as Australia emerged from the throes of the Covid-19 pandemic ahead of most rival markets.
May’s slide coincided with a move by Canberra to push for an investigation into the origins of the novel coronavirus, first detected in China late last year, drawing a sharp rebuke from Beijing and threats of economic reprisals.
A prolonged slump in interest from China’s real estate buyers could spell trouble for a sector that has been a pillar of Australia’s economy in recent years.
Mainland China has been a major source of foreign real estate investment, with investors pouring A$6.1 billion into residential and commercial construction and home auctions in the last financial year alone.
“If the situation doesn’t escalate further things will stabilise,” Juwai IQI Executive Chairman Georg Chmiel told Reuters in a phone interview.
“So long as it isn’t prolonged, as long as it isn’t systemic.”
May’s drop means mainland China now ranks below the United States and Canada as the largest source countries for investment in property in Australia, the Juwai IQI data shows.