Why house gains are likely

By Gerv Tacadena | 18 May 2020

While some banks and economists are expecting substantial falls in house prices over the next two years as a result of the COVID-19 outbreak, there are still those who think gains are likely given the strong housing fundamentals.

Simon Pressley, managing director of Propertyology, said house prices could actually grow over the next two years.

"As isolation measures relax, we could actually see a dynamic which resembles a seagull fighting over chips. The very low supply of volume of dwellings for sale in large parts of Australia before COVID-19's arrival has reduced even further," he told Your Investment Property.

On the demand side, Pressley said the market remains favourable given the low mortgage rates, support for first-home buyers, and the "sensible" credit policy.

“Savvy property investors understand three to six months of disruption is minor in the overall scheme of property ownership. If anything, it creates a small window of opportunity. After all, they are investing in the essential commodity of shelter,” he said.

Some of the biggest concerns cited by other market watchers include a sustained increase in unemployment and the decline in migration. For instance, a recent projection by the Commonwealth Bank of Australia (CBA) state a 32% price fall as a worst-case scenario, especially if the unemployment continues to track higher.

Pressley said it is crucial to understand that the influence of population growth on property prices is "grossly overstated."

Also read: The right investor mindset for COVID-19

"The activity of the 99% of people that constitute the existing population have a much greater influence than the extra 1% each year from overseas migration," he said.

However, these short-term challenges arising from the outbreak could still dampen the housing market. Pressley said of all capital cities, Sydney and Melbourne would be the hardest-hit, given their exposure to tourism and overseas migration.

"I think the locations with the better property market outlooks are among select regional cities that offer a combination of sub $500,000 median house prices, a diverse local economy, nominal price growth during the last decade, and where the housing supply pipeline is contained," Pressley said.

Michael Yardney, director of Metropole Property Strategists, said investors need to be able to take a long-term perspective when considering price projections.

"As always, while some people worry about the bad news and sit on the sidelines, strategic investors will set themselves for their future financial freedom by purchasing well-located real estate, recognising they only get a few chances in their lifetime to invest at the beginning of a new property cycle," he said.

Top Suburbs : coorparoo , stafford hts , mt gravatt , westbrook , westmead

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