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COVID barely affects house values but Westpac warns worst yet to come

Business

The national real estate market has started to see a COVID correction and while it’s not the carnage that had been anticipated the real jolt is yet to come, according to Westpac.

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Citing CoreLogic data, a report from Westpac showed Brisbane’s fall in home values had so far been negligible with a decline of 0.1 per cent in May and up 4.3 per cent for the year to date.

The weakness in Brisbane was mostly related to unit sales and its median value stands at $508,000. Sydney’s median value is $885,000 and Melbourne $686,000.

Corelogic said although housing values were currently slipping or stabilising, recent history implied most homeowners have some level of buffer that will help protect against negative equity.  National home values remain 8.3 per cent higher than they were a year ago.

Melbourne has suffered the most, with a 0.9 per cent fall in May following a 0.3 per cent fall in April. However, it was still up 11.7 per cent for the 12 months. Sydney was up 14.3 per cent for the 12 months.

“Most major capital cities recorded falls in May, reflecting the common shock from the coronavirus shutdown,” Westpac senior economist Matthew Hassan said.

“While the monthly price data confirms the start of a price correction, the figures on turnover were less negative, suggesting the direct disruption to activity has been less severe than earlier indicated and that it is already starting to ease.

“That said, direct disruptions are not expected to be the main source of price weakness which we instead expect to come indirectly from the shock to incomes and jobs.”

He said policy measures had acted as a shock absorber and delayed the impact on key aspects of the market so prices may be slow to fully reflect the shift.

“As it comes through, we expect declines to see prices nationally down 10 per cent for the year.”

However, the Federal Government is expected to announce stimulus measures for the housing market, including a boost to renovations.

The data showed the volume of home sales had deteriorated sharply, down 37 per cent for March and April and coming back in May with a 6 per cent lift, reflecting the easing of restrictions that prevented open homes and live auctions.

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