The GFC was no picnic, but the June quarter for residential real estate was an unmitigated disaster, particularly if the focus is moved away from price. If price is where our concerns are, then the greatest fall from the March Quarter to the June Quarter for apartments was Darwin which came off 14.7%, however Canberra only declined by a minimal 0.7%. Housing fared considerably better with Canberra up 2.8% whilst Hobart was the worst, declining by 6.3%. With the exception of Darwin apartments, the market has remained relatively robust regarding price movement given the circumstances.

However, price is not where the economy generates its jobs, it’s not where government revenue is generated and is not what puts food on families tables. The volume of transactions that occur has significant downstream multipliers that extends to white goods retail, homewares, landscaping and neighbourhood centres. As demonstrated by the tables below, every capital city in Australia has experienced its worst quarter of sales, irrespective of whether it is apartment living or housing.

The housing market has arguably been influenced by different market forces. Owners of housing have generally decided to remain in place with the attitude of “better the devil you know”. That is, if they don’t have to sell, then the impetus to move has been reduced down the list of priorities. By default, this has meant that less stock has reached the market place and thereby put a floor under any significant value declines. In fact, places like the southern Gold Coast, Noosa and coastal destinations are experiencing demand well out of proportion to the market size with price escalation likely to exceed the market dynamics experienced as little as two years ago. These are hot markets.

By contrast, the apartment market which has been dominated by investors, has very little appetite to speculate on acquiring anything that may be used for student accommodation, housing young people exposed to the hospitality sector or at risk of losing their job. With both international and national borders closed, this is unlikely to rebound anytime soon, particularly as legislation is very much in favour of the tenants at present. However, it should be noted that those boutique apartments that are well located and designed for owner occupiers are experiencing transactional demand. As people start to consider the downsizing option, the housing market has been highly supportive.

If there is any doubt that a healthy population is critical to driving the State and Federal economy forward, then the prospect of a second lock down as being experienced by Victoria is difficult for almost any sector, but property is one that has felt it quite sharply. Whilst the author will not be drawn into the merits on whether the borders should be opened or closed, the simple reality is that a lockdown is not a viable economic solution…nor is a sick population.

The author hopes that another solution is able to be identified as our knowledge of the pandemic continues to improve. As I look out my office window at a lifeless city, I do not want this to become the “new norm”.

Matthew Gross | Director

June Quarter 2020 worse than the GFC

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