The natural expectation during the Coronavirus Pandemic is that the housing market is going to see a similar downturn to 2007’s Global Financial Crisis, however, Nerida Conisbee, one of Australia’s leading property experts and Chief Economist at REA group believes the situation this time will be quite different. 

The 2007 GFC, like the majority of Australia’s downturns, was financially led. Whilst the impact has been dramatic for many due to the COVID-19 outbreak, the fact that our economic difficulties are driven by a health crisis that is looking to come to an end is one of a number of reasons a large housing downturn is unlikely.

Short-Term Trouble

Unlike earlier financial crisis’ the Coronavirus pandemic and it’s direct impact is predicted to be relatively short-lived with action taken by the Australian Government having very positive effects on the slowdown of the viruses spread. This is complemented by Australia being in the very fortunate position of having a financial system that is equipped to handle non-performing loans and offer mortgage payment deferrals at least in the immediate term.

The stability of the housing market is supported by the record low interest rates now down to .25% and a $90 billion loan to banks in line with the cash rate to ensure a cheap line of credit is passed on throughout the crisis. The RBA will fund the banks at the low rate for a period of three years with additional funding if the banks increase small and medium sized business loans.

The combined measures will alleviate pressure to sell including mandated deferrals of loans for businesses affected by the virus which will assist in holding off what could otherwise be a mass sell off. House prices are likely to fall in the short-term as a result of reduced demand but thanks to the measures in place the impact is likely to be far less dramatic then previous downturns and is likely to boost again as things return to normalcy. 

Job Losses Kept Under Control

Initial uncertainty across a broad range of sectors spread anxiety as many Australians feared a national shut-down could impact their employment status. Job loss and growth and is arguably the biggest factor in how a market fares on a local level. Whilst job loss has had a very clear impact it has only hit some sectors meaning some areas have fared better than others. Tourism, hospitality and entertainment have been all but shutdown which will have an impact on rental prices but once again is expected to be short-lived as the pandemic passes and employment levels decline. Fortunately, many industry’s have been able to adapt to lockdown climate keeping the unemployment rate lower than many initially expected.

Growth in the Ashes

Despite a time of economic uncertainty and the drastic impact on a number of industries others are actually experiencing growth. Essential services such as health is seeing both a short-term boost as an obvious need for medical professionals but also a likely long term benefit in terms of research, new hospitals and medical centres.

Government employment through Centrelink, ATO and Department of Health will also grow immediately which will have a balancing effect on the current burden the economy is under.

Final Word

Although we aren’t yet in the clear the right signs for calculated positivity are emerging. A downturn in some markets is a certainty, but like in the GFC with the Gold Coast other markets will actually thrive. Like any purchase understanding the total picture is essential if you wish to minimise risk and maximise chances of success.