Professionals Gosford COVID-19 Restrictions ease: What does this mean for the property market?
Listings are on the rise as restrictions ease.
May has seen an uplift in spirits in the wake of the COVID pandemic. Restrictions easing means more people are out and about and slowly going about their usual routines. Businesses are re-opening and the first steps to economic recovery are underway.
With in-person auctions and open homes returning in most states and territories, Australia’s property industry beams hope for the future. Search activity of properties for sale increased by 0.5% over the past week, marking the ninth consecutive week of positive change, and is now 38% above the same week last year, nationally. Whilst the search for rental properties has dropped slightly by 0.1%, search activity is still up by 23% from the same time last year.
Whilst these figures are promising, the property market is certainly not exempt from the global economic impacts of COVID-19. Whilst some speculate the true effects of the crisis are yet to be seen – the support from the Federal Government amidst the crisis has undoubtedly supported the Australian economy, and the property market has remained a steady and resilient force amidst trialing circumstances.
CoreLogic head of research Tim Lawless, said “Considering the weak economic conditions associated with the pandemic, a fall of less than half a percent in housing values over the month shows the market has remained resilient to a material correction. With restrictive policies being progressively lifted or relaxed, the downwards trajectory of housing values could be milder than first expected.”
What about rent prices?
Rent prices are likely to be more affected than property prices.
A pain-point in the real estate market is rents. CoreLogic recorded a -0.4% decline in rent prices nationally across Australia over April, led by Hobart, where rents declined -1.1%.
Rental markets have been particularly dampened by falls in employment. Jobs have fallen by about a third across accommodation and food services, and arts and recreation services. These are industries where workers are generally young, on less income, and are more likely to be renters.
How the Property Market can Aid the economic recovery
Australia is set to suffer first recession in decades – and yet the Property Market is still very much alive and active.
According to 2018 study by the AEC Group on behalf of the Property Council of Australia, the property industry employs more than 1.4 million people, more than any other sector in the country and is the biggest direct contributor to gross domestic product making up $87.9 billion annually in combined tax revenues.
Whilst the property industry has taken a hit during the pandemic, there are several ways it could act as a force to be reckoned with in terms of recovery post COVID-19.
- Stamp duty reforms.
There is no doubt that stamp duty is one of Australia’s most unpopular taxes that prevents people from buying and selling leading to a lack of stock turnover. The tax is problematic for state and territory governments as its reliance on property transactions makes annual tax revenues highly variable. This year will be a particularly bad one for government coffers with the decrease in sales due to COVID-19.
A positive solution would be to move away from stamp duty towards a broad-based land tax system. However, this process would take years, which is not ideal when trying to re-boot the economy. At a more targeted level, stamp duty exemptions are used by many state and territory governments to get first-home buyers into the market. At the very least, these exemptions could be extended for at least the remainder of the year.
- 2. Incentives for the development industry.
Changes to taxation would be an effective way to get local and offshore investors back into the new development market. In most states, offshore buyers pay additional taxes compared with local buyers and removing this would make Australian property far more attractive to this group.
- Fast-tracking planning approvals
Easing planning restrictions could have an enormous impact on economic growth.
Planning approvals are already being fast-tracked in response to economic growth, this is helping new projects off the ground. At the end of April, the New South Wales Government announced 24 projects earmarked for fast-tracking, meanwhile the Victorian Government this month approved projects with an end value of $2.5 billion.
- Wider access to cheaper finance
Banks are cashed up with $90bn worth of stimulus from the Reserve Bank of Australia and keen to restore their reputations after the Financial Services Royal Commission. While providing cheap, easy finance does generate activity in the housing market, it is a strategy that needs to be watched carefully, given the rise in unemployment.
- A drive to increase migration levels
The coronavirus crisis has closed Australia’s borders and, at its most extreme, the Australian Treasury has estimated that migration could drop by 85% in the next 12 months. While these figures are just an estimation, there is no doubt that housing demand is fundamentally driven by population growth. Australia is heavily reliant on migrants to drive new construction and demand.
Changes to migration levels are highly political but any increases would mean greater levels of activity for the construction industry.
Early spring rush could be on the horizon
John Bongiorno, a veteran of Melbourne’s real estate industry said he is expecting “a very different winter” this year as demand continues to move upwards.
“We’ve seen demand increase week-on-week since Easter and there have been a number of examples of expressions of interest and even private sales that have exceeded market expectations,” he said. “It’s giving vendors more confidence.”
Perth agent Jody Fewster, from Mosman Park, said the market was showing signs of great promise as COVID-19 restrictions eased.
“There is a quiet air of excitement with more buyers at home opens,” Ms Fewster said.
Source: REA Group, Core Logic, Nerida Conisbee