The Effects of COVID-19 on Newcastle’s Property Market
It’s no secret that COVID-19 has significantly impacted the day-to-day existence of those of us who live in metropolitan areas and large regional centres. While we’re slowly regaining some “normality”, particularly in terms of freedom of movement, our lives may never entirely return to a pre-COVID state and our current situation is definitely the “new normal” – at least for the foreseeable future. There have been some rather dire predictions about the effect COVID-19 will have on the property market and, if you’ve been thinking of selling your home, you’re likely wondering how the Newcastle property market is faring and whether it’s a good time to sell.
What does “the new normal” mean for the real estate market?
Earlier this year, when lockdowns were in full swing, the real estate industry went through some tumultuous times. Open homes and onsite auctions ceased and were replaced with online auctions and private inspections, and many real estate agents elected to create virtual tours of properties where possible. While there was a slight downturn in the market earlier in the year, as some buyers and sellers chose to wait and see what changes the coming months brought, the market has continued to perform relatively well in spite of the social restrictions and economic uncertainty caused by COVID-19, because the reality is that there will always be people who want to sell, buy and rent property.
What were the predicted effects of COVID-19 on the property market?
Earlier in the COVID-19 crisis some economists were anticipating an average 10% drop in property prices, while some worst-case scenario projections from the Reserve Bank of Australia suggested the drop could be anywhere up to 40%. While many experts were confident that the property market wouldn’t be subjected to such an extreme downturn, there were also those who suggested that we were yet to experience the full force of the virus’s impact on the property market.
How has COVID-19 really affected the property market?
More recently though, many of the major banks have reassessed their initial forecasts, in light of our country’s relatively successful medical and social management of the virus, which is having the effect of kickstarting economic recovery and boosting the property market. ANZ economists released a report this month indicating that, so far, there has only been a decline of just over 2% across Australia’s capital cities. Further to this, reliable data from realestate.com.au shows that house prices have performed better than expected, especially when regional areas are considered. In fact, the property market has proven so resilient that the ANZ report has forecast an upswing in house prices of around 9% across our capital cities in 2021.
Why hasn’t COVID-19 caused the predicted decline in the property market?
There are several reasons the property market hasn’t taken as hard a hit as was initially predicted:
- Job losses have, so far, primarily impacted renters and those in the under-30 age bracket
The economic downturn prompted by the pandemic has seen significant numbers of job losses and record levels of unemployment, but it has predominantly been those in the under-30 age bracket and renters who have been impacted by job losses. People in the over-30 age bracket and owner-occupiers tend to have greater financial buffers, more stable and higher-paying jobs, and have been well-supported by banks and lending institutions over the course of the pandemic.
- People have been spending less
While the majority of those in the over-30 age bracket, and the bulk of those in well-paid, professional jobs have so far escaped the unemployment crisis, the economic recession has made many households rethink their spending habits. Early in 2020 households were saving an average of 6% of their disposable income, compared with nearly 20% at the end of the third quarter. This is having the effect of not only creating more of a mortgage buffer for those in the middle-income bracket, but also boosting the consumer confidence of those in well-paid, secure jobs which is excellent for the premium property markets.
- Government assistance/economic stimulus has helped significantly
Most household wealth, and household debt, is concentrated in real estate. Government economic stimulus has been strong in the housing sector, via further cuts to interest rates, the First Home Loan Deposit Scheme (FHLDS) – allowing a deposit of as little as 5% on the build of a new home and additional subsidies for the purchase of a new home, and the HomeBuilder scheme. Furthermore, extensions to the JobSeeker and JobKeeper packages and additional income support payments have enabled many households to stay afloat during this economic crisis.
- Banks have been more supportive so far
Throughout the toughest period of the pandemic banks have offered customers the option to defer home loan repayments for up to six months and, now that the initial crisis period is coming to an end, banks are continuing to work with and support customers who are still finding themselves in financial difficulty. This support has meant fewer urgent, mortgagee sales, allowing people to retain their homes and preventing a glut in the market that would have weakened sale prices.
- Some parts of the economy are continuing to perform well
In comparison to the economies of other first-world countries, Australia’s economy is performing much better than expected. Australia’s relative success in managing the COVID-19 health crisis has enabled many sectors to reopen, and government policy and financial support has allowed many businesses and their employees to stay afloat. In addition to this the mining and agriculture sectors are continuing to perform strongly, and there is robust employment in federal government services.
- Concentrated risk – predominantly in the real estate investment sector
Rental listings slowed during the pandemic, but a sharp drop in immigration and a large reduction in the number of foreign students, has more recently resulted in a greater number of rental vacancies and notable reductions in rent, which has flowed through to increased listings of properties for sale. Suburbs hardest hit by repercussions of the pandemic are generally those with large numbers of apartments and those subject to the university market, and it is these suburbs that have shown the highest increases in rental listings.
Real estate markets in regional areas have performed well during COVID-19
The Australian Bureau of Statistics has recently released provisional data indicating that people are moving away from the capital cities in favour of regional areas. Housing market data indicates this shift has helped contribute to better performance in regional property markets, with regional markets faring better than capital cities, suggesting that COVID-19 has prompted people to make a sea-change or tree-change, and this is great news for places like Newcastle and the Hunter Valley.
Research shows that consumer demand for “lifestyle properties” has never been higher and, with significant relocation activity occurring, this is extremely positive for those regional destinations that offer a beachfront lifestyle, like Newcastle. Additionally, regional areas with good transport connections to major cities are proving to be attractive, especially with increased options around working from home. This is extremely positive for regional areas, even those that were popular before the pandemic, such as Newcastle and the Hunter Valley. Arnold Property has been operating in Newcastle for over 25 years, and our team of experienced agents and property assistants are well-placed to advise you on the current state of our region’s real estate market.
How has the Newcastle property market fared during COVID-19?
CoreLogic data released in July shows that the Newcastle property market has weathered the COVID-19 crisis very well, with the median dwelling price rising 0.8 per cent in Newcastle and Lake Macquarie, and a fall of only 0.5 per cent across the rest of the Hunter region. Newcastle property prices rose by 1.4 per cent over the four months to August this year, and monthly sale volume for July is above the average for the previous two-and-a-half years. In many areas, buyer activity hasn’t slowed and demand for properties has remained high, which is excellent news for those looking to sell. Arnold Property is here to help you navigate the current market and provide you with the expert knowledge of the Newcastle property market that can only come from a team of local agents with over 30 years’ experience.
Selling your home during COVID-19 – Is there ever a right time to put your house on the market?
There are many factors that can influence your decision to sell your home, not the least of which is the current COVID-19 situation. The Australian property market has been relatively resilient so far, resulting in only modest declines in property value across the board, and consumer confidence – a crucial indicator for the real estate market – is booming. Lower interest rates mean that prospective home buyers can afford to take out larger loans and bid more for properties they want, which will likely put upward pressure on house prices. The extent to which you are affected by any declines in the property market will depend on factors such as your property type, its location, and where it sits on the market value scale. The best way for you to find out where your property sits in the local market is to speak with experienced local agents, such as the team at Arnold Property.
Newcastle is well-placed to take full advantage of the current property market conditions:
- we are a regional capital in close proximity to Sydney,
- we have excellent transport and amenities,
- we offer a highly-sought-after beachfront lifestyle,
- we are a close commute from rural areas,
- we offer a cosmopolitan lifestyle without the drawbacks of a large city,
- we are a short distance from the wineries and other attractions of the Hunter Valley, and
- we are a popular tourist destination in our own right.
The team of dedicated Property Associates and licensed Real Estate Agents at Arnold Property are poised to help Novocastrians make the most of the current situation and maximise the potential returns on your property.
Get your property appraised today
The value of your property changes in line with changes in the real estate market, so it goes without saying that knowing the actual value of your property is the best way for you to make an informed decision on whether now is the right time to take the plunge and sell your property.
Arnold Property has a team of property appraisal experts ready to assist you in determining the true value of your property and achieving the best possible result for your sale. Contact us today to receive a no-obligation property appraisal informing you of your property’s value in the current market.