Data v doomsayers: Who is right when it comes to property prices?

“Let’s look beyond the headlines. I consider the data released over the past few weeks and let it speak to me,” Ms Pilkington said.

“It is interesting that the analysts who are now saying the market needs a ventilator are the same ones that were previously saying we were in a boom when the market had 80 per cent clearance rates. So, the way I do the maths, the distance between apparent boom and bust is 2.1 per cent.” 

Ms Pilkington argued that a lack of sellers is helping keep the value of properties higher.

“If vendors are selling, then the properties are clearly reaching their reserve. In fact, feedback from the REINSW member agents and auctioneers indicates that properties have been comfortably exceeding their reserve,” she said.

“As we know, when demand outstrips supply, property prices don’t tend to fall.”

Ms Pilkington noted that property is a long-term asset, meaning it does not have the same volatility that the sharemarket has.

“Property is a long-term asset acquisition; it cannot be lumped in with sharemarket volatility. You don’t day trade property! Importantly, shares don’t put a roof over your head – property does! Housing delivers one of the human necessities, shelter. It’s one of the first things we buy and the last we sell. In a market downturn, the discretionary expenditure gets cut first,” Ms Pilkington pointed out.

However, as Ms Pilkington explained, selling a house is not the first thing an investor does when they fall into financial trouble, meaning it might just be the delay before the inevitable downturn. 

The “extremely uncertain” housing market outlook is set to trigger a “collapse” in demand that could last until late 2021, according to ANZ Research.

ANZ Research has released a new analysis outlining its forecasts for the housing market in the wake of the COVID-19 pandemic.

The research group stated that it’s expecting property prices and construction activity to fall throughout 2020 and into 2021, before a “modest” recovery in the back end of 2021.

ANZ Research added that with the COVID-19 crisis prompting the closure of borders, new overseas arrivals would be limited, curtailing the largest source of population growth.

Accordingly, the group expects subdued population growth to further hinder demand for housing.

“Net overseas migration currently accounts for around 240,000 people or nearly two-thirds of Australia’s population growth,” the group noted.

“The federal government estimates Australia’s net overseas migration will fall by more than 85 per cent in 2020-21 (from 2018-19 levels) due to international travel bans instituted in response to the coronavirus.

“This drop in population growth will remove a major driver of economic growth and housing demand, at least for a period.”

Sydney and Melbourne markets are expected to be most impacted by the decline in population growth.

“In the year to June 2019, Sydney’s population grew by 87,000, with 85 per cent of those newcomers being overseas migration,” ANZ Research continued.

“In Melbourne, the numbers are also significant, with 77,000 overseas migrants accounting for 68 per cent of the total population growth of 113,000.”