According to the Real Estate Institute of Australia (REIA), forecasts of housing price drops of 30% or more are highly questionable and cannot be relied upon with any degree of confidence.
In a statement released this morning, REIA President Mr Adrian Kelly said, “We are in unprecedented times and anyone that suggests they can forecast with any acceptable degree of probability is being highly fanciful.”
This response from the REIA comes as a number of reports have outlined a ‘worst case scenario’ where house prices could fall by up to 30%, depending on the growth of unemployment during the coronavirus downturn.
Commonwealth Bank Chief Executive Mr Matt Comyn told The Age and Sydney Morning Herald, “We expect that there’s going to be downward pressure on house prices, although in the near term, the level of stock that’s coming to the market has contracted quite rapidly.”
“I don’t think it will be pronounced in the near term, but clearly if there’s a sustained economic downturn and you’ve got persistently high levels of unemployment then that’s going to flow through to a number of different sectors, including the housing market,” he said.
"Everybody seems to be talking the market down but the data doesn’t seem to want to support that.”
In a recent Real Estate Institute of NSW Facebook Live where CEO Timothy McKibbin, and President Ms Leanne Pilkington were discussing the state of the current market, Mr McKibbin said, “Everybody seems to be talking the market down but the data doesn’t seem to want to support that.”
Ms Pilkington highlighted recent auction clearance rates, stating, “Preliminary rates for Sydney from CoreLogic this week were 73.4%, of course that was only 193 properties that went to auction.”
According to Ms Pilkington, the week prior 216 properties went to auction, and the same time last year Sydney had 276 auctions and a clearance rate of 56.5%.
“People are trying to talk the market down, but what I’m hearing in the field [is] there is a lot of buyer interest, but it’s hard to get the vendors to put their properties on the market. That lack of supply when there is demand, we know, does not lead to a falling market,” she said.
CoreLogic have stated that rising auction clearance rates are likely the result of recent relaxations in social distancing policies specific to housing. While auctions are lower than last year, CoreLogic expects that as restrictions continue to ease, we will see that number go up.
In today’s REIA statement, Mr Kelly said, “we can only look at what is happening in the market place [sic] at the moment as well as in previous times of high unemployment to provide pointers to likely outcomes.”
“Currently we have a situation where listings are decreasing yet the enquiry level from prospective buyers is increasing. It is simple economics that when supply decreases and demand remains that prices edge upwards. They certainly don’t drop.
"History shows us that in the early 1990s we had a sustained period of unemployment above 10% yet median house prices remained stable"
“Whilst it is expected that higher levels of unemployment will provide a constraint on house prices the anticipated levels of around 10% have been experienced before and we should look at what happened to housing prices then.
“History shows us that in the early 1990s we had a sustained period of unemployment above 10% yet median house prices remained stable,” he said.
According to Mr Kelly, we need to acknowledge that during the ‘recession we had to have’ interest rates for housing loans were double what they currently are.
“I do not believe that this points to a catastrophic outlook for house prices,” he said.
According to Ms Pilkington, “I’ve had calls from some people who are really keen to demonstrate that the market is far from falling off a cliff... there's been people queuing at open homes.”
She called on real estate agents who are seeing buyers queuing and attending open homes or auctions to document this, and post images on social media with the hashtag #ozpropertyalive.
“All we want to do is get that hashtag trending with lots of people looking at property,” she said.