COVID likely to put chill on Spring selling season

Analysts have warned that the traditional Spring selling season is likely to be derailed by COVID-19, with transactions likely to plunge due to a fall in listings, rising unemployment and spiralling consumer sentiment.

CoreLogic analysis shows that historically listings across all markets rise significantly in the warmer months, a phenomenon unlikely to occur in 2020 as the pandemic continues to affect markets.

Melbourne, unsurprisingly, will be most hampered by the crisis, with its stage four lockdown resulting in a virtual pause in transaction activity.

New listings in Melbourne were down 54.9 per cent in the month to August 23, resulting in listings falling 9.6 per cent nationally.

In the four years prior to COVID, CoreLogic said the number of properties listed for sale had increased by an average of 6.3 per cent between late July and August.

CoreLogic head of research Eliza Owen said social distancing rules had resulted in fewer people being able to inspect, value and show properties, while economic uncertainty had also contributed to the decline in listings.

“As consumption falls and unemployment spikes, vendors feel less confident selling their property and getting their desired price,” Ms Owen said.

“This is further supported by the close movement exhibited between sales volumes and the consumer sentiment index.

“Significant falls in monthly sales volumes have closely aligned with this indicator.”

Ms Owen said mortgage repayment deferrals had also played a part in the plunge in new listings, with people that can’t service their loans not being forced to list as a distressed or motivated seller.

“This dynamic may change in the lead-up to March, when banks may need to end repayment deferrals,” she said.

“Property owners who have deferred their mortgages but are not in a position to reinstate their repayments by the end of March may decide to offload their property in the lead-up to this expiry date.

“It’s reasonable to expect mortgage arrears will increase from currently low levels, which could gradually see a larger number of distressed listings come on the market.”

While markets recovered quickly from the early coronavirus shocks in March and April, Ms Owen said once Melbourne’s restrictions are lifted any recovery is likely to be weaker.

“That is because employment is taking another hit, consumer sentiment is dampened by the reality of a second outbreak of the virus, and a reduction in fiscal support is only a month away,” Ms Owen said.

“Ultimately, the second round of restrictions across Victoria is likely to create a weaker ‘spring selling season’ than in previous years.”