Why Real Estate Prices Remain Resilient

Australia's real estate market has a good track record that could potentially help it withstand the impacts of the COVID-19 outbreak, said John McGrath, founder and executive director of McGrath Estate Agents.

While prices have already softened in major capitals, the rate of decline remains limited and some regions, especially regional markets, have even reported gains.

"The drops in house prices have been very slight even in Melbourne, largely due to historically low interest rates, options for deferral of loan repayments, and debt relief measures. relaunch, including JobKeeper and JobSeeker, ”McGrath said.

The most significant impact of the outbreak to date has been the decline in sales activity due to social distancing and foreclosure measures that have reduced consumer confidence. McGrath said the resilience of real estate prices will depend on the ability to contain virus outbreaks and the response of the economy. Unemployment, he said, is one of the biggest risks to property values, as it correlates with mortgage arrears.

"If people can't pay their loans, they usually sell. Buyers also tend to delay decisions when they feel uncertain. This can lead to a build-up of supply, which can lead to a build-up of supply. which softens prices ", he said

However, low interest rates make loan terms ideal for many homeowners and buyers, allowing them to easily refinance.

"This should help a lot of homeowners who have kept their jobs but lost hours and therefore income," McGrath said.

Another reason that rising unemployment amid COVID-19 is having moderate effects on prices is that most job losses are occurring in industries dominated by tenants. This means that the rental market is currently under greater strain than the sales market.

McGrath said it is possible that house prices after COVID-19 will rebound as they did after previous economic downturns.

For example, while values ??fell 7.6% during the global financial crisis, house prices rebounded considerably, with Sydney and Melbourne recording gains of 66.9% and 39.8% in the world. during the period 2012-2017.

"In the days to come when things look bleak, remember Australian ownership's incredible track record of relatively small setbacks during great economic storms followed by healthy rebounds," he said.

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