House prices fall by 2 per cent across Australia during June quarter: Domain House Price Report

House prices have fallen nationally by just 2 per cent over the last March-to-June quarter in a sign that government stimulus measures are managing to counter much of the COVID-19 drag.

At a time when unemployment is rising and household incomes are shrinking, the latest Domain House Price Report, released Thursday, shows a glimmer of hope that the economy isn’t taking such a massive hit as had originally been feared.

“The outlook for the housing market is definitely more stable than the broader economy,” said Domain senior research analyst Nicola Powell. “While prices in most capital cities have declined, the falls have been minimal to date.

“The unprecedented government stimulus with HomeBuilder, JobKeeper and JobSeeker, mortgage holidays, low stock levels and record low interest rates are shielding values from any significant declines, and helping to retain stability in the housing market,” Dr Powell said.

Melbourne so far has borne the greatest brunt of the price slump, with houses down 3.5 per cent, while Sydney has shown the second-biggest drop at 2 per cent and Perth the third at 1.5 per cent. Brisbane houses are down by 1.4 per cent, and Darwin by 1 per cent.

Three capital cities have actually had house prices rise over the period: Canberra by a staggering 4.1 per cent, Hobart by 1.4 per cent and Adelaide by 0.2 per cent.

“Canberra is the only jurisdiction through COVID-19 to see an increase in the number of hours worked,” said Housing Industry Association chief economist Tim Reardon. “Maybe it’s all those public servants administering JobKeeper and JobSeeker.

“But, it has more government agencies that aren’t as directly impacted by the closure of sectors of the economy and they have more stable employment, a relatively higher disposable income, a limited supply of detached houses and lower levels of stamp duty.”

Hobart still has lingering pent-up demand for housing and has enjoyed stellar price growth over the past five years, while Adelaide’s house market tends to be the most stable of all capital cities with fewer big swings and less investor stock.

Meanwhile, apartments nationally have shown a fall of 2.2 per cent, with Perth’s hardest hit at 4.9 per cent, Brisbane the next at 4.1 per cent, then Darwin at 3.7 per cent and Adelaide at 2.9 per cent. Less badly hit are Sydney at 1.9 per cent, Melbourne at 1.7 per cent, Hobart at 1.5 per cent  and Canberra at 1.3 per cent.

As well as the massive stimulus measures, now extended and to be tapered off gradually, there are other factors too that have prevented dramatic price drops.

“We must not forget most Australian residential markets were picking up significant momentum at the tail end of 2019 so this enabled a relatively resilient first few months of 2020,” said Michelle Ciesielski, head of residential research Knight Frank Australia.

“The number of property listings waned as the COVID-19 lockdown was enforced, resulting in many property prices holding firm. In addition, interest rates remain at an historic low and mortgage holidays have been extended to early 2021, although hurdles in gaining finance are starting to emerge given more full-time employees are working reduced hours.”

But this “orderly decline” so far has heartened many onlookers. Felicity Emmett, the head of Australian economics at ANZ, said experts were happy to see this kind of gradual drop-off in prices, rather than any dramatic collapse.

“Australians have so much wealth tied up in housing – more than 50 per cent of their overall wealth – so what happens to house prices filters through to the rest of the economy very quickly,” she said.

“So far, these falls have been a touch more modest than we expected, too. We forecast prices to fall 10 per cent from the peak to the trough across the country, with some areas lower and some higher. But at the moment, we feel comfortable with this level of price falls.”

Opening up the economy earlier than expected was a huge help, as well as the HomeBuilder program stimulating the new home market which, in turn, will influence the established house market, believes Mr Reardon.

The pandemic also dampened demand and supply simultaneously which helped stability.

Also contributing to the minimal fall has been that downsizers were the most active people in the home market, Ms Ciesielski said.

“So, job security isn’t so much a concern with many retired from the workforce,” she said.

In the medium term, it’s likely we’ll continue to see prices soften.

“House prices will remain under pressure, particularly given what’s happened in Melbourne and the resurgence of concerns in Sydney,” Ms Emmett said.

“But, this is definitely good news for now, although there’s a long road ahead.”