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12 Aug 2021

Can COVID-19 defeat the Australian property market?

By Damon Frith, wealth editor for Citi Early fears strict lockdowns would decimate the property market were not just wrong, they were spectacularly wrong

The reintroduction of snap lockdowns across Australia in response to a resurgence of COVID-19 is unlikely to put a significant dent in the property market, given its prior record in dealing with worse circumstances at the peak of the pandemic in 2020.

Strict lockdowns do impact the number of houses coming onto the market, in turn creating some short term impacts on prices as buyers stay at home. However, post lockdown the bounce back has proved to be strong, leading to record prices in most capital cities being recorded by the end of 2020.

The property sector now also has the added benefit of more than 18 months experience in dealing with COVID-19 related contingencies, while the roll-out of vaccines means a more normal existence is in sight, even though the NSW delta strain outbreak remains a grave concern.

Strict lockdowns fail to dent the property market

Australia came out of 2020 as one of the OECD nations to best weather the impacts of COVID-19, largely thanks to strict lockdown measures that stymied the spread of the virus before it could get a firm foothold.

State governments around Australia commenced the imposition of tough lockdown measures in March 2020, which proved highly effective at containing the initial spread of COVID, and were subsequently followed by a slew of ongoing nationwide restrictions.

While leading property forecasters such as SQM Research founder Louis Christopher forecast home price declines of as high as 30 per cent as a result of these measures, the Australian property sector instead bounced back to post a record-breaking performance by the end of 2020.

Sydney, Brisbane, Canberra, Hobart, Adelaide all saw their median home prices rise to record highs by the end of 2020, while in Darwin and Perth they lifted to multi-year peaks, according to data from Domain.

2021 lockdown circumstances pale compared to 2020

Australians may be still reeling from the reintroduction of snap lockdowns across the country since June this year, but these measures are unlikely to have as great an economic impact as those imposed in 2020, given major changes in circumstances as the world has learned better how to deal with COVID-19.

While the COVID-19 Delta Variation is causing significant containment issues on the East Coast of Australia, we do have the added advantage of access to vaccines which have been developed since the emergence of the pandemic, and will eventually provide herd immunity to the disease.

The Australian government has forecast that Australia is set to vaccinate around 80 per cent of all adults by year-end - well above the low-end threshold required to achieve herd immunity, and paving the way for a return to economic normalcy.

Technology can overcome many business hurdles imposed by lockdowns

Along with Sydney, Melbourne has been most sorely affected by COVID-19 prevention measures, enduring multiple lockdowns since the outbreak of the pandemic in early 2020.

The Victorian capital’s experience indicates however, that lockdowns need not be an impediment to staging of property sales, and that the local property sector has already made rapid adjustments using online technology.

Ray White chief executive Stephen Dullens has said lockdowns in 2020 gave the property sector ample experience with the use of Internet platforms to conduct sales, under conditions where home inspections and in-person group auctions were essentially banned.

Melbourne realtors invested heavily in online sales technology last year in response to city-wide home confinement measures, and vendors are now confident as well as conversant in its usage.

Snap Lockdown in February 2021 Failed to Deter Homebuyers

A snap lockdown held in Melbourne in early 2021, more than a year after the COVID-19 pandemic first emerged, serves as further proof that even the strictest of measures will fail to contain the property market in the wake of the disease.

Melbourne imposed an abrupt stage 4 lockdown in February, as the prospect of in-community spread of the Novel Coronavirus once again reared its ugly head in the Victorian capital.

The lockdowns prompted hundreds of homeowners to make recourse to virtual platforms and private negotiations to conduct sales, instead of deferring sales until the conclusion of the lockdown.

The episode serves as proof that while the lockdowns may prevent people from travelling far from their homes, they do not dim the enthusiasm and determination of prospective homebuyers eager to gain a foothold in a rapidly rising market.

However, lockdowns are not without impact, even with our experience in dealing with them. The current lockdowns in Sydney have impacted the number of new listings, and that has slowed the number of buyers participating in auctions, although clearance rates remain high.

Given that the property market already has technological measures to overcome movement restrictions, and there is already light at the end of the tunnel when it comes to containing COVID-19, the current round of lockdown measures are unlikely to pose much threat to the Australian housing market.


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