The housing market has fallen for the third consecutive month, albeit by far less than experts first predicted, with government support ending likely to trigger a collapse, new research has found.
According to results released by CoreLogic Home Value Index property prices fell by 0.6 per cent nationally, which was a slight improvement on June’s 0.7 per cent falls.
Melbourne was unsurprisingly the hardest hit capital city, falling by 1.2 per cent as the state continues to battle the COVID-19 pandemic.
Sydney also dragged property prices down, with Australia’s largest city falling by 0.9 per cent.
However, investors outside of Australia’s two largest cities have performed better than investors in Sydney and Melbourne.
Canberra and Adelaide both posted gains for the month of July, while the combined regional areas were unchanged in July.
According to CoreLogic’s head of research, Tim Lawless, the housing markets have weathered the COVID storm much better than originally anticipated.
“The impact from COVID-19 on housing values has been orderly [to date], with CoreLogic’s national index falling only 1.6 per cent since the recent high in April and housing turnover has recovered quickly after [its] sharp fall in late March and April,” Mr Lawless said.
The researcher points out that demand for property remains despite the economy at large going through its first recession in 29 years.
“As advertised stock levels are being absorbed faster than fresh stock is being added to the market. The unprecedented level of fiscal support from the federal and state governments, distressed borrower repayment holidays and record [low-interest] rates are the key factors supporting demand and insulating home values,” Mr Lawless said.
Despite the market remaining resilient so far, CoreLogic explains that government benefits and mortgage holidays will have an impact as they are relaxed in March 2021.
“As stimulus measures wind down and borrowers taking a repayment holiday face up to their debt, it’s logical to expect a rise in distressed properties coming onto the market. The extent to which this causes additional downwards pressure on home prices depends on how the Australian economy is travelling at that time,” Mr Lawless concluded.
“Further virus outbreaks present a clear and present danger to the depth and length of the recession, and the performance of the housing market.”
Nationally Mr Lawless told the media that he believes the property market will fall by 10 per cent nationally, with Sydney and Melbourne falling further.