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Despite a sequence of thirteen State or Territory lockdowns so far this year, property prices have been largely unscathed.
And even though the rate of house price growth is slowing, property values increased in all states in July with all our capital cities in line for strong double-digit property price growth this year.
But Australia’s economy could fall into its second recession in as many years if the COVID-19 lockdowns around Australia continue for weeks. 
Well, at least that’s what some economists have been warning.
Clearly, the most recent lockdowns affecting Sydney and for shorter periods, Melbourne South Australia, and Queensland will have a hit on the economy.
I’ve read estimates that these lockdowns are costing around $300 million a day, which is a very high price.
And, of course, we’re not out of the woods yet – are we?
What does that mean for our property markets?
Well, that’s one of the questions I’m going to ask Dr. Andrew Wilson, chief economist of My Housing Market and Australia’s leading housing economist, in our Property Insiders chat today.
We’re also going to talk about the biggest lift in housing credit in 11 years and the latest inflation figures.
Watch this week’s video as we discuss how the Australian property markets are coping with lockdown and how our auction markets performed over the weekend.
Sydney Auction Market
The Sydney auction market bounced back sharply at the weekend despite deepening Covid concerns and extended restrictions.
623 homes were reported as auctioned on Saturday and the weekend auction clearance rate was sharply higher at 79.1% – the highest recorded for the month.
High lockdown-related withdrawals continue to influence clearance rates with 20% of reported auctions withdrawn, which was lower than the 24% reported the previous weekend.
The clearance rate for houses was 80.8% with units lower at 75.2%.
Melbourne Auction Market
The Melbourne auction market produced more strong results as Coronavirus restrictions eased, despite a record-breaking surge in listings.
Melbourne recorded to 77.6% clearance rate of the weekend which was sharply higher than the previous 73% at the highest recorded for the month.
The month’s high clearance rate was recorded despite a surge in listings to yet another new monthly Saturday record for July.
The improved clearance rate was impacted by a sharp fall in withdrawals, down from the previous weekend 30.5% of reported auctions to 15.1%.
Is a second Australian recession now a ‘genuine’ risk.
The prolonged lockdown in New South Wales and rolling lockdowns in other states could be a big blow to our economy.
Economists are now pondering whether the extended lockdowns around Australia could throw us into a double-dip recession.
Watch this week’s Property Insider video to hear why Dr. Andrew Wilson does not believe we’re heading for another recession.
Sure it’s very likely our economy will contract in the September quarter, but watch this week’s video and you’ll hear why Andrew Wilson believes there will be a big bounce back in the December quarter as vaccinations extend to a majority of Australians.
Now that Australia’s inflation rate is 3.8%, is it time to worry?
We know the Reserve Bank has been trying to pump up inflation and recently the annual inflation rate for the 12 months to March was announced as 3.8%.
This is causing much speculation in the media including concerns about rising interest-rate (once again).
But most of the jump in inflation is only temporary, the result of several one-offs.
And the Reserve Bank is expecting inflation back below 2% by the end of the year.
The bank forecasts consumer prices to rise by 1.5% through 2022 and most economists broadly agree.
In this week’s Property Insiders video you’ll hear Dr. Andrew Wilson explain what’s lead to this jump in inflation and what’s really happening to underlying inflation.
The biggest lift in housing credit growth in 11 years.
I keep a careful watch on housing finance because it’s a good leading indicator of what’s ahead for our property markets people organise their finances 3 to 6 months before they end up buying a property.
Owner-occupier homebuyers propelled the surge in housing credit in June. In fact, housing credit lifted 0.7% – the most in 11 years – to be at 5.3% compared to a year ago.
And investor housing credit raised by .3% to be 2% higher than year-ago – the strongest annual rate in three years.
This recent strong growth in housing credit suggests will our property markets are going to finish the year strongly.
Of course, the prolonged lockdowns in Sydney and virus flareups and lockdowns in other States are likely to slow the rapid pace of house price growth in the second half of 2021, yet Corelogic figures show that property values have grown by 1.6% in the month of July alone.
Watch my discussion in this week’s Property Insider video as we explain how the lockdowns mean Sydney’s traditional spring selling season is likely to be pushed back into the summer months with fewer listings, auctions, and sales volumes in the near term.
That said, the eventual reopening of the New South Wales economy, supported by pent-up demand and a record low mortgage rate is likely to trigger a sharp rebound in Sydney property market activity.
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'Is a second recession now a genuine risk? | Property Insiders [VIDEO]' have 20 comments
June 2, 2021 Mike Schwarz
Dr Andrew Wilson – Question on Interest Rates
It is said that the banks have been receiving cheap funding from the reserve and this ends in June. They will then need to source funding on the global market which is markedly higher. This would suggest they will have no option but to raise interest rates.
Had you factored this into your view on interest rates?
June 2, 2021 Michael Yardney
Great question Mike. I know Dr Wilson has taken this into account from our private discussions. The banks will have to borrow overseas, but look what interest rates are overseas. Of course the value of the Australian dollar will be a factor.
Remember, the RBA is keen to keep interest rates low to stimulate the economy, increase business activity and jobs growth and eventually get unemployment down. They are not not going to pull the rug out from under us
April 25, 2021 Mark
Its interesting to watch the FOMO effect on purchasing real estate at higher prices than they are worth as real estates are elevating prices during the demand. I also recently read an account of a person at auction in Sydney saying I felt like I had won lotto just because he secured the winning bid !
Now the prices are rising so quickly and people are borrowing way to much to purchase at historically low interest rates its not difficult to work out what happens next when interest rates rise again !
See household debt in Australia
https://www.finder.com.au/australias-personal-debt-reported-as-highest-in-the-world
Another concern is the misdemeanor of good debt and bad debt lets face it all debt is bad but it portrays a certain air of its ok because its good debt .. but good debt can turn bad too ie negative equity
We see the occurrence every decade or so the debt delinquency increases this last happened when interest rates were increased
I have been in a position where I have not only seen this occur but almost been burnt too .. not a good feeling but you learn by your mistakes very quickly
The oracle Buffet says be fearful when others are greedy and greedy when others are fearful
I am standing back and waiting for this supposed pandemic mayhem to cease ….
April 25, 2021 Michael Yardney
What you say is correct – some people are making poor decisions driven my FOMO – but that doesn’t mean it’s the wrong time to make a wise investment decision
April 2, 2021 Mary
@Joseph
Your comment about “Australia heading towards Japan” and being over 1T in debt
Have you seen this link lately?
https://www.usdebtclock.org/world-debt-clock.html
Australia is doing AMAZINGLY WELL compared to the rest of the world.
I suggest to try removing the lens of pessimism and looking at life in general with a more realistic and optimistic outlook
People are angry when prices go down
People are angry when prices go up
Can’t seem to win either way eh?
April 2, 2021 Michael Yardney
Well said
March 3, 2021 Jennifer
90% of jobs recovered? I I don t think so. The tourism and travel sectors have been decimated and the education sector is not far behind. It s a shame that 9-5ers forget that these sectors even exist. I personally have been getting by on menial casual jobs for over a year and it looks like that will continue for most of this year as borders remain closed. Some of us have had our lives turned upside down for the foreseeable future, so No, it is not back to normal. I m lucky as I had some money and a mortgage already but I can t even go to the bank to access a better rate through refinancing as I don t tick a single box right now. And I work for a very reputable company normally – stood down definitely through no fault of theirs or mine. Not all of us are back to normal!
March 3, 2021 Michael Yardney
We quoted the Australian Bureau of Statistics latest figures. Of course for the many people like you who are still without a permanent job and the situation is terrible and we are not wanting to belittle that.
February 4, 2021 Raj Thakrar
Hi Michael,
It is too early to be generalist and say property prices will hike. There are number of factors in play here.
1 Due to lock down some sales were on hold
2 Government Incentive in play
3 Relaxed lending rule
4 Government incentive
Cost of new build artificially inflated by builders and developers sending cost of new build to new level making house price higher. The buyers technically are not benefiting for these Government incentives they are going in to builder and developers pocket. Housing in Australia is still young growing market so bubble will burst scenario does to stack up. It is always demand and supply simple economics.
February 4, 2021 Michael Yardney
Raj
The facts show property values are already increasing and have for 4 months. Yes this is driven by pent up demand.
Can they keep increasing? you may benefit from reading this: Property prices cannot keep rising at the same rate
December 10, 2020 Philip Lee
The property market didn’t collapse because the government is throwing everything at it to keep it afloat. Our property market is not a free market driven by market fundamentals. It is manipulated by the government cutting interest rates to zeo, stamp duty concessions plus first home buyer grants, and government guarantees for deposits all sucking in the financially unsophisticated into putting themselves into a life of mortgage stress. It’s just kicking the can down the road.
December 10, 2020 Michael Yardney
Philip. You are correct, our property markets have never been a “free market”, they have been manipulated by the Reserve Bank and APRA. Remember a couple of years ago when investors were dominating the market pushing up prices, the RBA raised interest rates and APRA made it much harder for banks to lend to investors and this slowed down the markets.
Currently intervention has supported our markets and that’s good. It’s the government’s job to protect its constituents – you and me and one way of doing that is providing stability to our housing market. They are too big to fail and no one will let them fail.
October 16, 2020 Joseph Battaglia
Michael your optimistic views irrespective of the true underlying data is disconcerting.
The government is covering up the reality of the situation, throwing money against the wall at all costs (hoping some will stick) and falsely propping up the economy whilst kicking the can down the road. The rhetoric from parties with bias/interest in the real estate market are also contributing to the propaganda that “things are ok and sentiment is up” – whilst reality is different.
We are not leaders on the world stage, for our real property obsession, in fact we are almost ridiculed that we are a nation that increases their wealth through selling properties to each other increasing the price at each transaction.
Its fiscally clear, we should allow the reset button to deflate this overvalued bubble and get back to reality. I mean seriously, some of these prices are ridiculous!
Are we going the way of Japan?
This QE is just irresponsible on all counts.
Over $1T in debt for such a small economy… come on, who are we kidding.
October 16, 2020 Michael Yardney
You are right Joseph, many of our industries are on life support from the government at the moment. And while the property market was being supported by loan deferrals, they seem to be cleaning themselves up nicely. What is the alternative? Do you really want to see businesses go broke and people go hungry? Our government and those around the world have learned how to handle economic downturns. And spending our way out of a downturn is a valid economic argument
October 2, 2020 Dave
Dear Michael. Your articles are interesting
and usually very well written . However this one is full of a lot of spelling and sentence construction mistakes that in parts make it hard
to follow . Take a look at where it says sh-t (Let me know if you need a proof reader ) 😉
October 2, 2020 Michael Yardney
Thanks for the heads up Dave – you are right lots of errors in this one. As I can talk faster than I can type I usually use voice to text, and it is pretty accurate. But clearly I missed a couple of bad bloopers this time.
July 24, 2020 Martin
The RBA will print money. And has printed plenty of it already to fight covid-19. It just doesn’t give the money directly to the government. It prints new money and uses it to buy government bonds on the secondary market so that institutions can take a cut as they buy the newly issued bonds from the government So that the government can pay for jobkeeper and Then these institutions onsell them to the RBA for a markup.
July 25, 2020 Michael Yardney
There has been a lot of discussion recently about Modern Monetary Theory, which suggests central banks should print more money and then give (lend) it to the government, to help pay for it debts.
This week RBA governor Philip Lowe said that he won’t do that (print extra money) instead the banks should borrow on the open market at the prevailing low interest rates because they can afford it.
Rather than print more money he gave the Morrison government the green light to increase debt levels and lock in a larger budget deficit to support the economy during its recovery from the virus crisis
June 26, 2020 Alex P.
While Dr Wilson may say that more sellers entering the market is an expression of confidence, the flip side is that it may be the smart money taking the opportunity to exit while prices are still holding up. If you drill down in the data is there a way to differentiate whether these are investment properties or owner occupied properties being sold and how does that relate to historical data. Second point is that government intervention has done a good job of addressing short term liquidity over the crisis but there have been no measures on a similar scale to address solvency, and solvency is what really matters after the liquidity tap has been turned off.
June 26, 2020 Michael Yardney
Alex, you are right on both counts.
Our experience on the ground speaking to buyers, sellers and estate agents, is that there are very few distressed properties coming on the market at present.
Similarly we do not believe the government is going to pull the rug out from under us in September after he’s gone to such an effort to support the economy and our markets