The impact of COVID-19 has seen a sharp drop in housing activity, although it has not translated into a drop in value, new research has revealed.
CoreLogic’s latest data showed that weak consumer sentiment did not have an impact on price, with most regions recording a rise in home values through April.
However, the national monthly pace of growth more than halved, dropping from 0.7 of a percentage point in March to 0.3 of a percentage point. The April result was the smallest month-on-month movement since June last year, when the national index was down by 0.2 of a percentage point.
“Although housing values were generally slightly positive over the month, the trend has clearly weakened since mid to late March, when social distancing policies were implemented and consumer sentiment started to plummet,” CoreLogic’s head of research, Tim Lawless, said.
The capital city markets generally showed a weaker performance relative to the regional markets, with the combined capital cities index up by 0.2 of a percentage point in April compared with a 0.5 of a percentage point rise across the combined regional markets.
The sharpest reversal in growth conditions can be seen in Melbourne, where values nudged into negative territory through April, down by 0.3 of a percentage point. Sydney values remained positive, rising by 0.4 of a percentage point over the month. To provide some context, the six months prior to March saw both cities averaging a monthly growth rate around 1.7 per cent.
According to Mr Lawless, Australia’s largest cities have a higher level of downside risk as COVID-19 sees border closes.
“Sydney and Melbourne arguably show a higher risk profile relative to other markets due to their large exposure to overseas migration as a source of housing demand, along with greater exposure to the downturn in foreign students, stretched housing affordability and already low rental yields that are likely to reduce further on the back of rising vacancy rates and lower rents.”
Hobart was the only other major region to record a decline in home values over the month, down by 0.1 of a percentage point.
Mr Lawless explained the Hobart drop was due to it having the most exposure to industries that are impacted by COVID-19 — “12.7 per cent of the workforce are employed within accommodation and food services, and arts and recreation services sectors”.
Emma Ryan is the deputy head of editorial at Momentum Media.
Emma has worked for Momentum Media since 2015, and has since been responsible for breaking some of the biggest stories in corporate Australia, including across the legal, mortgages, real estate and wealth industries. In addition, Emma has launched several additional sub-brands and events, driven by a passion to deliver quality and timely content to audiences through multiple platforms.
Email Emma on: [email protected]