Left Menu
Development News Edition

POLL-Weak demand now the bane of once-storming Aussie housing market

Australian housing market activity won't recover from the recent slowdown for at least a year as dwindling household incomes and soaring unemployment hammer demand, causing home prices to fall this year and next, a Reuters poll of analysts showed.

Reuters | Updated: 29-09-2020 05:36 IST | Created: 29-09-2020 05:36 IST
POLL-Weak demand now the bane of once-storming Aussie housing market

Australian housing market activity won't recover from the recent slowdown for at least a year as dwindling household incomes and soaring unemployment hammer demand, causing home prices to fall this year and next, a Reuters poll of analysts showed. Now in its first recession in three decades, Australia's economy is expected to recover slowly even though the spread of the coronavirus is largely under control and most businesses have reopened. Still, policymakers expect unemployment to rise to about 10% from 6.8% in August.

That forecast comes despite aggressive monetary policy easing from the Reserve Bank of Australia, which has so far chopped its key interest rate to an all-time low of 0.25% and launched a bond-buying campaign to hold market yields down. The Sept. 16-28 poll of 12 property analysts showed average home prices would fall 4.5% this year and another 2.8% next. The market is forecast to recover 3.4% in 2022. All of these were slightly milder predictions than in the Reuters poll in June.

"The deterioration in household income will be the biggest driver of weakness, but elevated uncertainty, much lower population growth and weak investor appetite given the slump in the rental market will all weigh on house prices," said Felicity Emmett, senior economist at ANZ. "Government support and the deferral of home loan repayments have undoubtedly helped support the market. But with unemployment likely to continue to rise and fiscal stimulus to shrink in Q4, prices are likely to continue to decline."

Six of the 10 property analysts who answered an additional question said activity in the Australian housing market would take at least a year to recover from the recent slowdown. In a worst-case scenario, the median forecast of a slightly smaller sample showed a 5.0% decline in house prices this year and next, with forecasts ranging from -6.0% to as low as -15.0%.

Asked which was a greater risk for the Australian housing market over the coming year, all but one of six analysts said a sharp economic slowdown. "We believe house prices will face downward pressure nationwide, as supportive factors will be outweighed by the impact of the change in net immigration," wrote Ben McCarthy at Fitch Ratings in a note.

"Immigration had already been slowing prior to the outbreak of the pandemic, but has plunged since the health crisis led to strict controls on international travel." A regional breakdown of the poll data showed Sydney and Melbourne, which contribute about 43% to the country's gross domestic product, were forecast to decline 2.0% and 7.0% in 2020, respectively, sliding again by nearly 4.0% in 2021.

"The impact of closed borders on immigration, which has helped fuel the housing market, particularly in Sydney and Melbourne in recent decades, will be significant," said Shane Oliver, chief economist at AMP Capital. "Home prices are expected to fall by around 10%-15% from their April high. Melbourne is particularly at risk on this front, as its 'Stage 4' lockdown has pushed more businesses and households to the brink."

(For other stories from the Reuters quarterly housing market polls:)


TRENDING

OPINION / BLOG / INTERVIEW

Kenya’s COVID-19 response: Chaos amid lack of information

Confusing numbers and scanty information on how effective curfews and lockdowns have been in breaking transmission have amplified coordination and planning challenges in Kenyas response to COVID-19. Without accurate data, it is impossible t...

Farkhad Akhmedov: Calculating the price of impunity from the law

In insistences such as the battle over the Luna, Akhmedov has resorted to extreme legal machinations to subvert the High Courts decision and keep his assets from being seized. ...

Guinea’s elections hearken back to the autocracy and violence of its past

... ...

Pandemic-era FinCEN leaks ratchet up the urgency of lifting the veil on financial secrecy

As the coronavirus pandemic reverses decades of gains in combatting inequality, its more urgent than ever that authorities excise the dirty money that has metastasized within the financial systems guts....

Videos

Latest News

Science News Roundup: Nokia to build mobile network on the moon and Flu shot may offer some protection

Following is a summary of current science news briefs.Got any signal up here Nokia to build mobile network on the moonStruggling to get a phone signal at home on planet Earth Perhaps youll have better luck on the moon. Nokia has been select...

People News Roundup: Ghislaine Maxwell cannot keep deposition details secret, U.S. appeals court rules

Following is a summary of current people news briefs.Ghislaine Maxwell cannot keep deposition details secret, U.S. appeals court rulesA U.S. appeals court on Monday dealt Ghislaine Maxwell a blow by refusing to block the release of a deposi...

FACTBOX-Latest on the worldwide spread of coronavirus

Wisconsin battled one of the worst coronavirus surges in the United States, while Argentina and Spain were set to cross one million infections and Ireland announced some of Europes toughest COVID-19 constraints.DEATHS AND INFECTIONS For an...

Pentagon estimates cost of new nuclear missiles at $95.8B

The Pentagon has raised to 95.8 billion the estimated cost of fielding a new fleet of land-based nuclear missiles to replace the Minuteman 3 arsenal that has operated continuously for 50 years, officials said Monday. The estimate is up abou...

Give Feedback