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Home values remain steady, but outlook uncertain

Houses along the coast
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Future growth in Australian residential markets is uncertain due to the changing nature of the COVID-19 crisis. Photo: Shutterstock

Home values remain steady, but outlook uncertain

Home values continue to hang tough in the face of the COVID-19 crisis, but analysts warn of downside risks in the medium-term as government stimulus measures are scaled back and a potential second wave of coronavirus cases re-kindles economic uncertainty.

Home values continue to hang tough in the face of the COVID-19 crisis, but analysts warn of downside risks in the medium-term as government stimulus measures are scaled back and a potential second wave of coronavirus cases re-kindles economic uncertainty.

Capital city house prices fell for a third consecutive month in June, with CoreLogic’s monthly analysis showing another slight dip.

CoreLogic said its capital city median house price index dipped 0.8 per cent in June, with the biggest falls experienced in Melbourne (-1.2 per cent) and Sydney (-0.9 per cent).

Perth’s home values were down 0.6 per cent in June, while in Brisbane median prices dipped by 0.4 per cent.

Only Canberra (0.6 per cent) and Adelaide (0.1 per cent) posted a rise in dwelling values.

For the last three months, CoreLogic said capital city median home values fell 2 per cent, but remain 7.9 per cent higher than the same time last year.

CoreLogic head of research Tim Lawless said the data showed housing markets were hanging tough despite the economic challenges of the COVID-19 pandemic.

“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.

“Record-low interest rates, government support and loan repayment holidays for distressed borrowers have helped to insulate the housing market from a more significant downturn.”

Mr Lawless said listings remained 15.2 per cent below where they were at this time last year, but warned that changes to the federal government’s JobKeeper and JobSeeker stimulus measures, set to take effect in October, skewed the medium-term outlook to the downside.

“Urgent sales are likely to become more common as we approach these milestones, which will test the market’s resilience,” he said.

“Similarly, the recent concerns of a second wave of the virus and the potential for renewed border closures and stricter social distancing policies are likely to further push consumer sentiment down.”

Rental markets have not held up as well, with rental rates trending lower and the weakest conditions being experienced in Hobart, Sydney and Melbourne.

Perth and Adelaide are showing the strongest rental conditions, with low levels of investor participation historically limiting excess rental supply.

Unit rentals are leading the plunge, with rental rates down 2.6 per cent since March, while house rents are down 0.3 per cent over the same period.

Mr Lawless said some inner city areas in Sydney and Melbourne had seen rental listings more than double since March, with the combined impacts of temporary migrants departing and overseas arrivals stalling hitting markets hard.

He said the transition of units previously listed on short-term accommodation portals such as AirBnB to the traditional  leasing market had also added to rental supply.

“Additionally, the significant employment decline across food and accommodation services, arts and recreation services is compounding the weak rental demand as these sectors’ workers are more likely to rent,” Mr Lawless said.

“To date, these sectors have seen the largest number of job losses and impact to wages.”

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