Brexit and the US/China trade war are now far closer to being resolved, which is good news for global economic stability. However, seemingly as soon as this has been resolved, the coronavirus is set to be declared a pandemic due to the ease at which it appears to be spreading worldwide.
If it can’t be contained quickly, then the impact on economic growth could be very bad news. If we look at the impact of SARS in 2004, the virus led to a drop in GDP for a quarter but then the next quarter, economic growth accelerated as the Chinese Government pushed forward a stimulus program to get the economy moving again.
Perhaps this will happen again and if so, it is unlikely to have too much of an impact on Australia.
The impacts on the property market are twofold. The first is the impact generally on pricing and the second is the impact on foreign demand, in particular from China.
If a SARS-type economic impact occurs, then the impact on pricing will be quite minimal. It is unlikely that one quarter of economic decline in China, followed by a big jump would result in a substantial loss of employment in Australia.
If the impact was more severe and Australia’s unemployment rate started to rise rapidly, then this would be bad news for households and bad news for prices.
The impact of the virus on Chinese interests in Australian property is uncertain. The SARS-type response is unlikely to lead to a big jump in Chinese demand for property – search activity from China on realestate.com.au showed a big pick up in November and December last year but January was again down.
It is hard to tell whether the virus drove this, or perhaps the Chinese lost a bit of interest in Australia for other reasons.
If it gets worse, Chinese buyers’ interest in Australia could pick up further, but the Chinese Government may shut down a flow of funds to overseas if the economy is doing poorly.
Investor interest is seeing strong growth. Email enquiries from investors at realestate.com.au have increased 19% this January compared to January last year. The states seeing the biggest jumps have been ACT, WA and Tasmania.
For WA, this is particularly good news given how tough conditions have been there for some time. It is, however, coming from a very low base and we still see first home buyer enquiry eclipse this group.
At a suburb level, the unit market is dominated by high volume apartment locations – Melbourne CBD, Gold Coast and Brisbane CBD. The email enquiry number for houses is also dominated by high development areas such as Werribee and Point Cook. The most surprising entry is Orange, NSW.
There were 355 auctions in Melbourne and 316 in Sydney this weekend. These numbers are roughly similar to the same time last year. Clearance rates hit 76% in both Melbourne and Sydney, which is consistent with strong market conditions.
The most viewed property going to auction on realestate.com.au last week was 5 Stephen Road, Ferntree Gully – a house type popular with Melbourne buyers (big home, big block) at an affordable price. It sold for $700,000.