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As the residential property market cools, economic experts say prices will not go into ‘freefall’.

Written by The ReReport

As the residential property market cools, economic experts remain confident that house prices will not go into ‘freefall’.

As the residential property market cools, economic experts remain confident that house prices will not go into ‘freefall’.

There is no doubt that the effect on house prices will play-out differently in certain locations, however there are several factors that may directly affect the true impact.

The economic downturn has so far resulted in the luxury end of the house market being heavily affected. Money may be able to buy you many things, however it appears that Coronavirus does not discriminate and according to recent state health data, the highest number of confirmed cases of the disease in Sydney, Melbourne and Brisbane are in affluent areas. This is likely to be due to those who can afford to live in these suburbs were more likely to have been traveling overseas in recent months.

Canberra is particular is most likely to be positively impacted as the new Government stimulus’ has led to a surge in government sector based employment. For Perth, the story may be similar with iron ore exports remaining high and gold prices hitting a record high in Australia. Australia’s Department of Industry, Science, Energy, and Resources has assumed that almost all Chinese workplaces will be fully operational by mid-year therefore boosting Australian business sooner rather than later.

Key factors that come into play to support the property experts claims of the residential market being strong enough to survive this pandemic include things such as the belief that Coronavirus will be short-lived unlike financial crisis’ such as the GFC when it was unknown how long it would continue to affect the economy. In addition to this, the $130 billion government stimulus available to Australians is a response never seen before.

The Reserve Bank has also come to the party by providing $90 billion to the banks at a record low rate of 0.25 per cent with the promise of additional funding if the banks increase lending to small and medium-sized businesses.

Unemployment will also vary from state to state and has undoubtedly had a significant impact on rental listing as well as the number of buyers in the market. Cities that rely on heavily impacted sectors such as tourism and educational institutions for international students will definitely suffer and therefore affect the movement of property in that area due to their economic downturn.

For now, the message remains as a ‘wait and see’ mentality. Australia continues to adapt in these rapidly changing times, and the true effect on residential house prices is yet to be seen.

 

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