subscribe to our newsletter
subscribe to our newsletter

Housing market faces prolonged downturn: ANZ

The “extremely uncertain” housing market outlook is set to trigger a “collapse” in demand that could last until late 2021, according to ANZ Research.

ANZ Research has released a new analysis outlining its forecasts for the housing market in the wake of the COVID-19 pandemic.

The research group stated that it’s expecting property prices and construction activity to fall throughout 2020 and into 2021, before a “modest” recovery in the back end of 2021.


An average peak-to-trough decline of 10 per cent has been projected for home values across Australia’s capital cities.

Hobart is expected to record the sharpest declines throughout 2020 and 2021 (11.2 per cent), followed by Melbourne (9.5 per cent), Sydney (8.1 per cent), Brisbane (4.6 per cent), Darwin (4.2 per cent), Adelaide (3.7 per cent), Canberra (3.2 per cent) and Perth (0.2 per cent).

According to ANZ Research, the deterioration in household income would be the main driver of weakness in the housing market.

“Already, nearly a third of Australian households have reported a deterioration in their finances due to COVID-19,” the group noted.

“This collapse in income will create significant uncertainty for households and leave many unwilling to commit to buying or building a home.”

ANZ Research stated that while home loan deferrals would “help prevent forced sales”, the “collapse in demand” off the back of an “extremely uncertain” outlook would weigh on dwelling values.

Subdued population growth to contribute

ANZ Research added that with the COVID-19 crisis prompting the closure of borders, new overseas arrivals would be limited, curtailing the largest source of population growth.

Accordingly, the group expects subdued population growth to further hinder demand for housing.

“Net overseas migration currently accounts for around 240,000 people or nearly two-thirds of Australia’s population growth,” the group noted.

“The federal government estimates Australia’s net overseas migration will fall by more than 85 per cent in 2020-2021 (from 2018-19 levels) due to international travel bans instituted in response to the coronavirus.

“This drop in population growth will remove a major driver of economic growth and housing demand, at least for a period.”

Sydney and Melbourne markets are expected to be most impacted by the decline in population growth.

“In the year to June 2019, Sydney’s population grew by 87,000 with 85 per cent of those newcomers being overseas migration,” ANZ Research continued.

“In Melbourne, the numbers are also significant, with 77,000 overseas migrants accounting for 68 per cent of the total population growth of 113,000.”

Rental, construction markets to feel pinch

Pointing to figures from property research group CoreLogic, ANZ Research noted that rental listings have risen significantly over the past few months, particularly in inner Melbourne (36 per cent in the month to 26 April) and Sydney (34 per cent).

The research group expects the demand and supply imbalance to weigh on vacancy rates and residential rental yields over the coming years.

As a result of a less lucrative market for investors and an oversupply of housing, ANZ Research is projecting a sharp contraction in construction activity.

“The uncertain income outlook, as well as the sharp reduction in population growth, will curtail demand for new homes from both owner-occupiers and investors,” the group stated.

“The likely pullback in investor demand, given very challenging conditions in the rental market, will also weigh on the outlook.”

ANZ Research concluded: “Housing construction is already down 12 per cent from the peak in mid-2018.

“ANZ Research expects activity to continue to contract over the next year, bringing the total peak-to-trough decline to 25 per cent.”

[Related: NSW, Victoria open door to stamp duty reform]

Housing market faces prolonged downturn: ANZ
Housing market faces prolonged downturn

Charbel Kadib

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.

Latest News

Westpac was the only big four bank to kick off the June quarter with a contraction in its mortgage book, according to the latest APRA data....

There’s a limit to what monetary policy can do to manage economic cycles in the foreseeable future, the Reserve Bank governor has said bef...

The government has announced that it has now finalised its “enhanced” regulatory sandbox, allowing fintechs to test the viability of new...


LATEST PODCAST: Property remains a stable asset despite cautious market

Do you expect COVID-19 to reduce or increase your business flows?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.