Economic shocks and the Property Market

CoreLogic just released an interesting article regarding the impacts of economic shocks on the residential property market. Here’s a snapshot:

• Negative economic shocks do not necessarily lead to severe declines in property prices.

• Property does not see the same declines as shares during a downturn, because it is used to live in and therefore not as speculated upon as shares; additionally, it cannot be bought and sold as quickly as shares, meaning price movements are not as volatile;

• Due to the temporal nature of the COVID-19 downturn, vendors may hold high expectations for their property value and simply hold off selling until the economy returns to full-scale production.

• The current high level of household debt amplifies the risk of an adverse change in household circumstances such as loss of income, unemployment or illness on housing market conditions; and,

• The number of property transactions have seen more drastic declines in response to economic shocks. Eg sales volumes fell 40% over April across Australia.