24 Sep 6 key reasons why house prices aren’t plummeting despite the recession
Due to COVID-19 restrictions, Australia is officially in a recession, but housing prices have yet to plummet. At this point, every capital city except for Darwin has higher house prices than they did a year ago.
According to economists at realestate.com, there are five key reasons for this.
Banks are being supportive
Struggling homeowners have been supported by banks who have had the ability to offer six-month mortgage payment freezes. These loans expire this month, meaning those people who are able to start repaying their them, will be required to do so. Those who are still unable to, will be given an extension.
If banks stop supporting virus-hit homeowners, mortgagee sales would likely increase dramatically which in turn would cause house prices to tumble.
Unemployment is hitting renters
Unemployment is rising, with young people being the hardest hit. This rise has hit the rental market, with rental listings increasing dramatically in the months after the pandemic, causing prices to drop.
Parts of the economy are doing well
Despite the recession, not every part of the economy is struggling. In Queensland the mining sector is providing a decent boost. According to the economists from realestate.com, Queensland is currently home to the most confident buyers and sellers.
Employed people aren’t spending as much
Although the majority of well to do, white collar professionals have managed to retain their jobs, the recession is making everyone nervous. In effect households are currently saving nearly 20% of their disposable income.
Safe work conditions for such households is good news for the premium property markets, with many of Australia’s expensive suburbs continuing to see price growth through the pandemic.
Stimulus is helping
Government stimulus like the JobKeeper payments are helping keep house prices steady. Policies that target home buyers, like the 5% home loan deposit scheme and the HomeBuilder grants are ensuring a steady flow of demand into housing.
According to economists, the largest threat to house prices at this stage is the potential withdrawal of support to homeowners from banks. The economy failing to quickly bounce back or unemployment continuing to rise could also have dire effects on the housing market. For now however, prices are more stable than predicted.