economics at the federal bank of australia (Commonwealth Bank) warned that the economic depression caused by the coronavirus would make an "inevitable" adjustment in house prices, could fall 10% or more in sydney and melbourne over the next six months.
Sydney`s house prices could fall by 10 per cent by October and Melbourne`s could fall by 11 per cent, the bank said Friday, as rising unemployment, falling rents and a lack of foreign investors hit key markets in these real estate.
Housing prices in other capital cities could also be significantly adjusted. The Federal Bank of Australia predicts that house prices in Darwin and Canberra may fall by 10 per cent, in Adelaide, Brisbane and Hobart by 8 per cent and in Perth by 7 per cent.
The bank`s head of Australian economic, Gareth Aird, said there was a series of pressure on the property market, which would lead to a downward trend in house prices.
He said :" New loans are expected to shrink, investors are expected to reduce from optimistic to pessimistic, market rent or decline, building auction liquidation rate will continue to be weak, turnover will be lower than normal. "
In addition, as a result of the closure of the border, the potential strong demand for migrants, usually from abroad, has disappeared. The result means that falling house prices are inevitable. "
"The extent of the decline in house prices will depend to a large extent on the extent of the rise in unemployment and the length of time government imposed restrictions on daily activities. "
Despite considerable uncertainty about real estate price trends, prices in sydney and melbourne will fall more sharply than elsewhere in australia, mr ald said.
He said :" New and Virginia economic are dominated by services most affected by the epidemic, supplemented by smaller sectors (such as mining and agriculture). "
"Furthermore, the real estate markets in Sydney and Melbourne are more dependent on strong population growth, immigration, to support demand. "
According to March employment data released Thursday by the Australian Bureau of Statistics, the unemployment rate rose slightly to 5.2%. But the survey was conducted early this month, when companies had not started laying off workers.
As consumer confidence is nearing collapse, purchases of non-essential goods have dried up.
Mrer said that the labor market is facing a shock, which is a key reason behind the bank`s forecast of house prices.
During the economic recession of the 1990s, he said, unemployment peaked at 11% and house prices fell 6.2% in 20 months.
But excluding the effects of inflation, real house prices fell by 15%.
The unemployment rate rose gradually over the years during the 1991 economic depression, but Alder said this time the unemployment rate could rise rapidly and pull back quickly, which would have a limited impact on real estate markets.
"A sudden rise in unemployment will mean that real estate markets are immediately affected but should not last long ," he said. "
(Reference: Sydney Morning Herald)
