A View from Australia

Australia has managed to contain the coronavirus so far, carrying out 1.5 million tests to this point, effectively testing 6% of our population.

Kicking-off with property news from the weekend, Australia had recorded its third consecutive week of auction clearance rates above 60%, and the number of auctions held despite being historically low, had more than doubled over this time.

CoreLogic had also released their Home Value Index stating dwelling prices across the country had fallen milder than expected, at -0.4% for the month of May. Dwelling prices recorded 8.3% growth in the year ending 31 May 2020, with 0.6% of this growth happening since 1 March 2020. 

The shallow number of listings especially in the rightsizing space, pent-up demand carrying over from the restricted lending phase and a favourable currency play for expats for the best part of three months, has seen prices hold up across most cities. Increased enquiry is currently being observed for offshore buyers considering living, working and studying in Australia, with reported sales going ahead prior to international travel restrictions being lifted. 

On Tuesday, the Reserve Bank of Australia (RBA) maintained the cash rate target at 25 basis points stating “In April, total hours worked declined by an unprecedented 9% and more than 600,000 people lost their jobs, with many more people working zero hours. Household spending weakened very considerably, and investment plans are being deferred or cancelled.”

Despite restrictions being eased earlier than first envisaged, reports of some stabilisation in the hours being worked and the declining rate of new infections, the RBA expects the coronavirus to have a long-lasting effect on the economy with high uncertainty around the nature and speed of the recovery. Although they stated its “possible that the depth of the downturn will be less than earlier expected”.

On Wednesday, the Australian Treasurer announced Australia was entering an unavoidable recession for the first time in 29 years as a result of the pandemic, with economic growth shrinking by 0.3% in the March quarter. By international comparison, Australia has proven resilient so far, with the economy faring better than most other developed countries. 

Although there are still tough times ahead, this initial position would not have likely been possible without the fiscal and monetary support by the Australian Government put in place to minimise the economic impact. These have included JobKeeper, increased JobSeeker, one-off payments to beneficiaries, and cash flow boosts to small and medium sized businesses. 

The Australian Government further announced on Thursday, a stimulus package aimed at propping up the residential construction sector. The HomeBuilder grant provides A$25,000 towards the construction of new homes or substantial renovations for existing homes. The contract must be entered in between 4 June and 31 December 2020, with works to start within three months of the contract date.

The much-awaited scheme may not be taken up as swiftly as first intended with access limited to an Australia citizen with an annual income of A$125,000, or A$200,000 for a couple, to either build their principle place of residence valued up to A$750,000; or substantially renovate an existing home valued at less than A$1.5 million, where the renovations are valued between A$150,000 and A$750,000.

Given the longer lead required for new apartment construction, this scheme provides little support to address the lack of new supply likely to hit most major capital cities over the next three years, despite the projected curbing of population growth.