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Could Coronavirus Help First Home Buyers Finally Take The Plunge?

Housing prices could tank by 32 percent thanks to coronavirus, a dire Commonwealth Bank analysis forecasts.

But don't go rushing off to get a bank loan just yet, with other experts saying the pandemic is unlikely to dramatically drop housing prices or help young people into the property market.

CommBank on Wednesday released its latest quarterly update. The bank forecast, under a worst-case "prolonged downturn" sparked by the pandemic -- and associated shutdowns, unemployment and market woes -- the Housing Price Index could plummet 32 percent by March 2023.

Under a more conservative "downturn" measure, the market could see an 11 percent drop over the same period.

Depending on how Australia bounces back from the pandemic in coming months, other projections forecast housing prices could drop by 10 percent nationally by 2021 -- but that depends on factors which are hard to predict, such as unemployment rates, and the effect of ending bank mortgage reprieves later this year.

While there may be longer-term cratering of house prices, property analysts CoreLogic don't expect to see anything special in coming months.

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"We haven't seen a big decline in property prices," the company's head of research, Eliza Owen, told 10 daily.

"Over the first weeks of May, the combined capital cities index is starting to show month-on-month decline, but not much. It's less than half a percent."

Simon Pressley, head of research at Propertyology, said the potential effects of the pandemic on housing had been overstated by some.

"Lots of news headlines make it out to be like there's blood in the streets, but it’s nothing like that," he told 10 daily.

Despite a sudden spike in unemployment, Owen said this tiny blip was "not surprising" to market experts.

As treasurer Josh Frydenberg outlined Tuesday in an economic statement to federal parliament, housing sales have plummeted 40 percent, but Owen said a confluence of fewer looking to buy homes, and fewer looking to sell, had seen the market settle at more or less equilibrium -- keeping prices nigh unchanged.

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"In April, we saw the number of properties selling down 40 percent on the previous month, and that reflects what we’ve seen historically in economic shocks. Values do decline, but the volume of property bought and sold declines much more severely," Owen explained.

"A property purchase is high commitment and high cost. If people aren't certain about their personal prospects, they won't participate. Not a lot of people want to sell now."

Fewer buyers are in the market right now. Image: Getty

She said in the last month, just 160,000 properties had been listed for sale nationwide, compared to 230,000 at this time in a normal year.

"Having so few listings is part of what's keeping prices stable. We're not seeing an influx of distressed sales of property to put downward pressure on prices," Owen said.

Pressley explained the economic response of state and federal governments -- such as expanding JobSeeker welfare payments, instituting the JobKeeper wage subsidy, and measures to support banks and financial markets -- had plugged the risk for so-called 'distressed sales'.

"Getting banks more sympathetic to delay repayments on loans will stop the need for distressed sales. What causes markets to tank is not just one person being in financial poo, it needs lots of people. With these government policies, I can't see that happening," Pressley told 10 daily.

"I would be surprised if we saw any significant price reductions. I think things will largely stay the same for a few months at least."

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He said other conditions -- such as record low interest rates -- had seen Australian property prices at above 10 percent growth immediately before the COVID pandemic, and that since most of those conditions still remained, it was unlikely for prices to tank now.

"We’ll always need shelter. As we relax social distancing, and get back to life as normal, I'd think some markets will actually produce price growth in coming months," Pressley predicted.

However, Owen flagged things could change in the back half of 2020.

Image: AAP

"The test for the market will be around September, when the banks' period of reprieve on mortgage payments finishes. We'll have more people struggling to pay their mortgage, which will determine the amount of stock that comes to market and influence prices," she said.

"It depends where employment and consumer confidence end up."

Owen said there was "potentially" an opportunity for buyers in coming months to take advantage of easing property prices, but said the possible gains for young people specifically may be cancelled out by the fact that they may be more likely employed in the sectors hardest-hit by coronavirus shutdowns, such as tourism or hospitality.

Pressley did have some good news for young people and first homebuyers, though. The analyst predicted governments may look to stimulate the post-COVID economy with homebuying incentives.

Pressley also said rental prices were trending downward in some parts of Australia, potentially giving more chances for tenants to save toward a home deposit. Tourism shutdowns and international university students heading home had led to vacancies in inner-city apartments and properties rented out to travellers, such as through AirBNB, he said.

"Government initiatives are still there to help first homebuyers, and I wouldn't be surprised if states launch policies to stimulate the economy through the housing sector," Pressley mused.

Have a story tip? Contact the author: jobutler@networkten.com.au