It’s one of the most googled questions since the Covid-19 outbreak began: how will coronavirus affect house prices?
The bottom line is it will be negative – prices will go down. People, up until now, have been talking about the property market developing a bit of momentum, with the interest rate cuts we had last year and the easing of credit conditions.
But coronavirus has changed the story for 2020.
Rate cuts and stimulus packages can only do so much
The Reserve Bank cut rates soon after news broke of the developing coronavirus outbreak. On its own, that’s positive for the housing market (meaning prices stabilise or go up).
But the reason the bank is cutting is coronavirus is negatively impacting the economy as a whole – there’s no escaping that fact. Yes, the government has released its stimulus package and there may be more fiscal stimulus on the way, but there are limits to what any government can do. There will be negative effects on employment. It will be a short, sharp shock to the economy.
I fully expect a strong rebound by 2021 but, in the short term, it will hurt. There are sectors of the economy where people will lose jobs and it’s fair to say coronavirus is generating uncertainty more broadly in the community and, in turn, in the economy.
In the housing market the bottom line is there will be a pullback by buyers and that will take momentum out of the market, and we could see some price falls.
You can also look at what it’s done to other asset prices. Yes, interest rates are lower but other assets, notably equities, are being hit.
For a lot of people with wealth tied up in the share market, their wealth has been diminished. So capacity for many people to use that wealth to buy into the housing market has been reduced.