Home values in Australia declined for a third consecutive month in July, but several factors are preventing any substantial dips, according to the latest market report from CoreLogic.
National home values declined by 0.6% in July, slightly slower than the 0.7% decrease recorded in the previous month. Of the capital cities, Adelaide and Canberra managed to post gains in prices at 0.1% and 0.6%, respectively. Melbourne, on the other hand, reported the most significant decline at 1.2%.
On an annual basis, prices are still substantially higher than a year ago. National prices remain 7.1% higher than last year.
While Sydney registered a 0.9% decline over the month, values in the New South Wales capital are 12.1% higher than they were during the same month last year.
Tim Lawless, head of research at CoreLogic, said house prices appear to remain resilient amid the COVID-19 outbreak. In fact, the impact of the outbreak on housing values seems controlled, with the national index falling only by 1.6% since the recent high in April.
"Record-low interest rates, government support and loan repayment holidays for distressed borrowers have helped to insulate the housing market from a more significant downturn," he said.
These factors also helped keep advertised supply tight, which, in turn, prevented prices from falling further.
"Additionally, increased demand driven by housing specific incentives from both federal and state governments, especially for first home buyers, have become more substantial," he said.
The table below shows the price movements across capital cities in July:
However, challenges remain in the foreseeable future, given the expected moderation of several support schemes. These factors will further test the market's resilience. Will these bring a surge in distressed properties in the market? Will these cause a significant drag on home values?
"The extent to which this causes additional downwards pressure on home prices depends on how the Australian economy is travelling at that time. Further virus outbreaks present a clear and present danger to the depth and length of the recession, and the performance of the housing market," Lawless said.
If there is a market that is in a solid position to handle the impacts of the outbreak, it would be the regional areas. CoreLogic data show that housing values in regional markets remain unchanged.
This is consistent with a recent study by the PRD Real Estate, which shows that regional markets, on average, reported a 3.4% growth in median prices over the first six months of 2020, with Tasmania leading the gains at 9.8%. Of all states, only Western Australia registered a decline, with median prices dropping 0.5%.
"In the face of COVID-19 regional markets were slightly more insulated from economic shocks as there was less reliance on international trade and a more affordable housing market," the report said.
