For the past few months whilst Australia has been faced with COVID19, we have experienced empty shops, streets and offices. With the easing of restrictions, it is evident that businesses will start to operate again, individuals will be able to return to work, and traffic will start to build up. However what does this mean for the property market?
The property market has been heavily impacted by COVID19. The Royal Bank of Australia reported the lowest interest rates in Australian history of 0.25% since late March. Banks are reluctant to hand out loan agreements for home purchases, as they have reduced profitability and are high risk.
With the announced ease of restrictions in the following weeks, will we see an increase in the transactions within the property industry? The answer is yes. Interest rates may not increase for a while and banks may still be hesitant to give out loans. However, there have been a few little wins recently that have instilled hope of the bounce back of the property market. The property market may not rebound immediately but it is expected to make a V-shaped recovery.
The easing of outdoor gatherings, allowing up to 10 people, has enabled public auctions and house inspections to occur again. This lifting of restrictions could not have come at a better time. According to a Core Logic report, clearance rates were at an all-time low. Since the changes in restrictions, the week ending 10th of May, saw clearance rates at 59.9%, which was a jump from 30.2% from previous weeks.
Below you can see a graph comparing the number of auctions and the clearance rates over the past few months. It is a clear visual on how COVID19 has been affecting the buying space.
According to the new rules, in the following weeks we should see the number of auctions increase, with probability of high clearance rates.
Despite the estimated increase in buyers and sellers, we cannot say that the property market is going to kickstart immediately. However, the property market is on the rebound. Once individuals start to return to work and jobs start recovering, the property market will start moving. Once all restrictions have been lifted, including international travel, it will further lift the market out of its current state, and we can expect that ‘V-Shaped recovery.’