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Expert commentary

News summary

Residential sector

The AFR has reported that house prices have been softening since mid-March with the sales rate beginning to run out of steam. According to CoreLogic, property transactions have dropped by 40% across the country, but the full impact of COVID-19 will not be felt for several more months. Melbourne saw the worst decline in value, with a 0.3% drop in house prices over March. (Melbourne house prices fall, Sydney loses steam – Ingrid Fuary-Wagner 01/05/20)

ANZ has predicted that house prices will continue to fall until June 2021 due to high unemployment rates. The AFR reported that ANZ is expecting house prices to drop 10% from the peak to trough across the country’s capital cities. (House prices to bottom out by mid-2021: ANZ – Nila Sweeney 07/05/20)

The Urban Developer analyses ANZ’s forecasts in ‘House Prices to Fall 10pc: ANZ’.

Rental Market

The Australian has reported that plunging rental prices will accelerate the drop in house prices, according to Morgan Stanley. The analysts are expecting property price falls of up to 15%. CoreLogic have cited rising unemployment, fewer international students and a collapsing tourism sector as factors for the decline. (Rental market crash tipped to fuel house price drop – Ben Wilmot 05/05/20)

The Real Estate Conversation have analysed Melbourne’s rental market: Victorian vacancy rates improve easing rental squeeze.

OTHER KEY HEADLINES

Return of on-site auctions will 'boost' confidence — AFR 03/05/20
Calls for surplus land to be used for public housing as pandemic bites — The Age 04/05/20
Coronavirus: Chinese buyers ready to pounce on Australian property — The Australian 04/05/20
Domain group hit by sharp decline in new sale listings — The Australian 05/05/20

Commercial sector

Retail

The Australian has reported that major shopping centres may reopen soon despite tensions remaining over rental agreements. Companies including Myer, Apple, Kathmandu and The Cotton On Group will likely open over the next week or two. Shopping centre landlords expect customers to return to malls soon and revert to their pre-crisis spending habits. (Shopping centre landlords in retail therapy push – Ben Wilmot and Eli Greenblat 07/05/20)

However, Vicinity Centre, retail landlord and Chadstone’s owner, expects that the retail climate will continue to be challenging for the next 12 months. Supermarkets aside, growth amongst stores is plummeting due to government initiatives to contain covid-19. (Vicinity says retail environment will remain tough for 12 months – Ben Wilmot 06/05/20)

OTHER KEY HEADLINES

Wary retailers track job losses as coronavirus spending slips — The Age 06/05/20
JB Hi-Fi sales jump in pandemic thanks to work at home and leisure boom — The Age 06/05/20

Offices

The Age has reported that the nature of office leasing is likely to change following COVID-19 due to social distancing restrictions. Hot desking, communal staff zones and employee flexibility will all be new considerations for companies and offices returning to work. (Dexus signals tough times ahead for office sector – Carolyn Cummins 05/05/20)

The Australian reported that Macquarie Equities has estimated that office rents could fall up to 25%. These estimates are based on patterns analysed from previous recessions. Analysts at UBS expect vacancies to double to 10% in Sydney, and other cities will see significantly bigger drops. (Office tower rents could fall by up to 25pc: Macquarie Equities – Ben Wilmot 06/05/20)

The Urban Developer examines different analysts’ forecasts in ‘Office Markets Under Pressure as Rent Outlook Sours’.

OTHER KEY HEADLINES

'Offices are the new cruise ships for COVID-19' — AFR 07/05/20

Hotels

The AFR has reported that hoteliers will see their revenues decline by up to 30% over the next 12-24 months. Sydney is better placed than Melbourne with more projects in the early phase of the supply life cycle and therefore has a greater opportunity to recalibrate to lower demand. However, the industry will still need to wait until mid-2021 before a more meaningful revival of the setor returns. (Hotels face years of ‘significant revenue destruction’ – Larry Schlesinger 03/04/20)

Construction & development

The AFR has reported that construction has slumped in April with cancelled and suspended projects cutting activity. New orders and employment have also recorded their sharpest decline ever, according to the latest Performance of Construction Index. (Construction slumps on new orders, wages – Michael Bleby 05/05/20)

Read the full report from Ai Group: Performance of Construction Index – April 2020.

The Age has reported that the building industry is requesting that the Victorian government return builders and unions to maximum production as soon as possible. The groups, in an open letter to Daniel Andrews, requested that restrictions would be eased on construction sites and reopening display homes and sale offices . (Push for building industry to trial easing of COVID-19 restrictions – Jewel Topsfield 06/05/20)

OTHER KEY HEADLINES

Public projects to drive boom — The Australian 03/05/20
New structural failure for Opal Tower builder — The Australian 03/05/20

Planning & approvals

Historically, urban design and architecture has changed in response to pandemics like the Spanish Flu and typhoid. The Age reported that, already, cities like Paris and Auckland have closed roads to cars, lowered speed limits or introduced pop-up bike lanes as a response to less people using public transport during the global pandemic. Australia’s urban planners are considering how COVID-19 will alter our cities due to changing economic and social demands. (Melbourne in a post-pandemic world: how the virus could transform the city – Jewel Topsfield 03/05/20)

Dr Joseph Monaghan, from law firm Holding Redlich, has analysed the changes in planning legislature due to COVID-19. Read more in ‘Overview of the COVID-19 Omnibus (Emergency Measures) Act 2020 – from a planning perspective’.

OTHER KEY HEADLINES

Building approvals fall 4pc in March — AFR 04/05/20
Car parks out, footpaths and cycling lanes in as city prepares for post-COVID commuters — The Age 07/05/20
Council urged to shelve 'idealistic' plan to axe apartment car parks — The Age 07/05/20

Finance sector

Lending

The AFR has reported that property investor lending has dropped 2.5% seasonally, according to ABS data for March. Loan commitments, which largely reflect loan applications, show that overall investor lending fell around $200 million in March. However, these statistics are expected to fall further for April, as COVID-19 restrictions and unemployment continued to fall after March. (Investors pulling out of property as lending falls 2.5pc – Matthew Cranston 06/05/20)

AFR reported that Teachers Mutual Bank has cancelled funding for off-the-plan mortgages due to over 55% of apartments in Sydney and Melbourne settling with a valuation lower than the original price. This can be attributed high uncertainty of future valuations caused by falling demand. (Off-the-plan lending axed as settlement fears rise – Duncan Hughes 06/05/20)

Despite this, March figures from the ABS show that housing finance has peaked. Read more on The Real Estate Conversation: March housing finance numbers at their peak.

Tax reform & policy

The AFR reported that Victoria and NSW governments are moving forward on plans to ditch stamp duty and replace the tax with a more efficient system to support families having trouble amid the global coronavirus pandemic. Whilst stamp duty is the biggest source of income for NSW and Victoria, it is seen as extremely inefficient and is a barrier to housing affordability. (Victoria backs tax reform, stamp duty push – Patrick Durkin 05/05/20)

Economy

The AFR has reported that the number of long-term immigrants into Australia could drop by 300,000 over the next two years as a result of COVID-related travel restrictions. As population growth is a major driver of economic growth, and housing, the country’s economy could suffer significantly until our borders open and immigration increases. (What an 85pc fall in migration means for the economy and housing – John Kehoe 01/05/20)

The AFR also reported that the Reserve Bank of Australia expects the nation’s economy to contract 8% by June. However, the economy will then recover quickly to be down 6% by the end of 2020. This is dependent on when covid-19 restrictions are lifted. (RBA: 8pc contraction by June, then fast recovery likely – Matthew Cranston 08/05/20)

OTHER KEY HEADLINES

Coronavirus hardship hits Westpac mortgage holders — The Australian 04/05/20
Coronavirus: RBA clear that interest rates are going nowhere — The Australian 05/05/20
Mortgages plunge as buyers fear repayments — AFR 05/05/20
Beach house and Airbnb income banned in NAB credit crackdown — AFR 05/05/20
Housing stress on the rise — AFR 06/05/20

Debuilt Property provides development management & financing services to developers and property owners. Visit our Developers.Owners page to find out more about our services.

Design and architecture

Ha Long Villa designed by VTN Architects

Archdaily
Connecting people with nature, this hotel is designed to mimic the landscape surrounding it — Ha Long Bay in Vietname. Read more on Archdaily…

Learn more about Debuilt Property www.debuilt.com.au
Paul pabrahams@debuilt.com.au or Daniel dburger@debuilt.com.au

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