The COVID-19 outbreak has presented potential risks to specific sectors of the economy — what could it potentially do to the housing market?

Eliza Owen, head of residential research at CoreLogic, said the while sales activity will likely be affected, house prices might not necessarily go down. She said the residential property sector has historically fared well against adverse economic shocks compared to other sectors such as the stock market.

For instance, the 1987 "Black Monday" stock market crash that led to a 23% value loss in a single day left the residential values unaffected.

"By October of 1988, residential property values experienced double-digit growth, as financial deregulation contributed to asset value inflation," Owen said.

A similar scenario happened during the Global Financial Crisis in 2007 to 2008. While national dwelling values declined in January 2009, the uplift in mining-related investment and the host of rate cuts and government action have led to a swift recovery.

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Owen said the coronavirus outbreak will likely dampen consumer sentiment, which, in turn, would moderate property transaction volumes. The likelihood of isolation measures, for instance, will restrict open houses.

"In the short term, the coronavirus and subsequent share market declines have already had a significant impact on consumer confidence. This may lead to postponed dwelling purchases, as housing is an expensive, high commitment purchase decision," Owen said.

Despite this, house values may not necessarily fall. Owen said many vendors may view the current pandemic as a "temporary economic condition.”

"If monetary and fiscal stimulus can adequately support business and household income amid the slowdown, then the next few months could see a sharp contraction in sales volumes, but not necessarily dwelling values," Owen said.

The expectations for market activities to return would likely cushion any drastic impact on property prices.

The situation, then, would be similar to the high seasonality in sales volumes usually seen around annual holiday periods.

Over the past two decades, sales activity in the months of November and December declined by an average of 15.9%. Despite this, prices have increased by 0.2%.

"While the current pandemic is by no means a holiday, it is temporary. Unless the current slowdown presents a significant drag on incomes, vendors may not see the need to lower their property value expectations," Owen said.

This means that property is less volatile and slower to respond to market shocks, Owen said.

“It is a consumption good and it is tied to fundamentals of employment opportunity and income growth. In the current climate, the Australian housing market is more insulated from foreign demand and investment speculation than it has been over previous years,” she said.