If you are anything like us, you are continuing to watch the housing market closely during these tumultuous times. We are yet to see the full impact of COVID-19 on the property sector, and according to realestate.com.au, the ultimate outcome will depend on three factors: employment, population growth and consumer confidence.
Employment is essential for home buyers to secure finance and for homeowners to pay their mortgages.
While more Australians are employed than not, our unemployment rate is currently at its highest level since October 2001, at 7.4%. As reference, it was 5.2% in January, before COVID hit.
The JobKeeper scheme is certainly helping to keep people employed, and the unemployment rate could change when the scheme is modified in September, and finishes in March next year.
It generally takes a long time for unemployment rates to bounce back after a recession. For example, before the Global Financial Crisis in 2007, our unemployment rate was 4% – and it has not been below 5% ever since.
However it is important to note that an increase to the unemployment rate will not necessarily lead to property price declines. It takes a number of factors, not just one.
Population growth is the main driver of housing demand, and a decline in growth generally leads to a decline in demand.
Recent ABS data shows that Australia’s population growth was already slowing before COVID-19 hit due to reduced overseas migration. Overseas arrivals generally increase demand for the rental market and new homes, as opposed to existing homes, so those sectors will be the ones most hit.
The new HomeBuilder scheme will help to increase demand for new homes, but doesn’t assist with increasing rental demand.
Potential home buyers are much more likely to purchase a property when they feel secure in their employment and their overall financial status.
The ANZ-Roy Morgan Weekly Consumer Confidence Index indicated that confidence fell dramatically when COVID first hit, but has since picked up significantly, thanks to the JobKeeper program and bank mortgage assistance.
Whether or not consumer confidence will continue to grow will depend on what happens when government stimuli and bank support ends.
If you wish to discuss any aspect of the property market with us, please feel free to call into our Casuarina office, send an email or call us on 02 6674 3444.