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Property research group CoreLogic has released its latest Hedonic Home Value Index, reporting a 0.7 per cent rise in national home values in March.
This was driven by a 0.7 per cent increase in combined capital city values and a 0.6 per cent increase in combined regional values.
Darwin recorded the sharpest monthly increase in dwelling values (2 per cent), followed by Sydney (1.1 per cent), Brisbane and Canberra (0.6 per cent), Perth (0.5 per cent), Melbourne (0.4 per cent) and Adelaide (0.3 per cent).
Hobart was the only capital city to record negative price growth in March, with values down 0.2 per cent.
The national improvement in March continues a long-term trend of price growth following a wave of political, economic and regulatory developments in mid-2019.
But this trend is set to be short-lived, with the economic fallout from the coronavirus (COVID-19) outbreak set to trigger a “plunge” in housing market activity, according to CoreLogic head of research Tim Lawless.
“We are expecting the number of residential property sales to fall dramatically over the coming months – a consequence of tanking consumer confidence, a rising jobless rate and more cautious lending practices,” he said.
“Restrictions on open homes and on-site auctions will compound the slowdown in buyer activity, as would any future policy announcements relating to peripheral services such as building and pest inspections, conveyancing and furniture removals.”
Market indicators have already begun pointing to a slowdown in sales activity, with auction clearance rates falling below 60 per cent.
The reversal in sentiment has prompted some analysts to forecast price declines of up to 15 per cent against an unemployment rate of 10 per cent (currently 5.1 per cent).
However, Mr Lawless said that while much will depend on the length of the current crisis, conditions underpinning the mortgage market, including low interest rates and the repayment relief arrangements recently announced by lenders, would partly shield housing values from the looming “plunge” in sales activity.
“Considering the temporary nature of this crisis, along with unprecedented levels of government stimulus, leniency from lenders for distressed borrowers and record-low interest rates, housing values are likely to be more insulated than sales activity,” Mr Lawless said.
“The extent of any fall in housing values is impossible to fathom without first understanding the length of time this health and economic crisis persists. Arguably, the longer it takes to contain the virus and bring economic operations back to normal, the higher the downside risk to housing values.”
The CoreLogic analyst noted that in the meantime, current restrictions on property transaction activity would limit the reliability of statistical analysis of market trends.
“If we are correct in our expectation that housing market activity is set to temporarily plunge, we could see increased volatility and a reduction in certainty creep into housing market measurements until activity picks up,” he added.
“Measures of housing values and prices rely on timely updates of recently sold properties; a material slowdown in turnover is likely to create some challenges over the coming months in how we report on market conditions.”
[Related: New interventions to hit housing turnover]