Property prices bounce ahead of COVID-19 outbreak

The Australian Bureau of Statistics (ABS) has released its latest Residential Property Price Index, reporting that when assessing the weighted average across eight Australian capital cities, home values increased 3.9 per cent in the three months to December 2019.   

The sharpest reported increase was in Melbourne (5.2 per cent), followed by Sydney (4.7 per cent), Canberra (3.1 per cent), Hobart (2.7 per cent), Brisbane (1.8 per cent), Adelaide (1.4 per cent) and Perth (1.1 per cent).

Darwin was the only major capital to record a decline in residential property prices, down 0.3 per cent over the same period.

The price growth reported by the ABS is in line with recent data from property research group CoreLogic.

CoreLogic’s latest index revealed that prices continued to rise in the early months of 2020, with national home values up 0.9 per cent in January and 1.1 per cent in February.

However, the pick-up prices preceded the coronavirus (COVID-19) outbreak, which has posed a significant threat to the domestic and global economy.

Some analysts, including CoreLogic head of research Tim Lawless and AMP Capital chief economist Shane Oliver, have warned that the outbreak could stunt price growth amid fears of a looming recession.

Mr Lawless observed: “A more significant downturn in consumer sentiment related to the coronavirus outbreak could become a determining factor that impacts the market over coming months.

“While housing demand is now relatively insulated from a downturn in foreign buyers, the economic impact on key export sectors such as education, tourism and commodities [is] likely to result in weaker economic conditions and lower consumer sentiment.

“Consumer sentiment readings are already low, and a further deterioration could see housing market activity start to slow.”

Mr Oliver added: “[If] the situation badly worsens globally and the virus takes hold in Australia, then it could become a big short-term negative as the economy slows even further potentially into recession, the loss of sharemarket wealth drags on property demand and if people put off buying property along with other activities for fear of catching the virus.”

However, such downside risks to housing market activity could be offset by lower interest rates, with the Reserve Bank of Australia (RBA) expected to follow up its cut to the cash rate in March with an additional reduction, which would bring the official cash rate to 0.25 per cent.

The RBA is also set to announce “further policy measures to support the Australian economy” later today, with some analysts expecting the central bank to pre-emptively cut the cash rate ahead of its regular meeting in April.

[Related: Further easing on the cards amid COVID-19 threat]