There have been a number of snap lockdowns across Australia recently due to Covid-19, particularly in the eastern capitals of Melbourne and Sydney. As a result of this, many are beginning to question whether these lockdowns will start to have an impact on property prices in either of the capital cities.
This week our term at Loansuite is taking a look at the current state of the lockdowns in each of the capital cities, what the data is telling us, and how we expect the markets to be impacted by both investors and owner-occupiers going forward.
Firstly, it’s important to consider the current state of Covid-19 restrictions in each city, which we’ve outlined below:
As of the 17th July 2021, people in many Sydney suburbs are now banned from leaving their local area with stay-at-home orders being brought in. The only people exempt from the new rules are those in emergency services and healthcare workers, including aged care and disability service workers. Highlighting just how strict these new rules are, even construction workers are not considered exempt.
Businesses such as supermarkets and bottle shops will be able to remain open, however, most non-essential retailers will be forced to close. Another exception here will be those offering takeaway and food delivery services. These rules are to remain in force until 30th July and it is currently unclear whether the rules will apply to all of Sydney, or just the currently affected suburbs.
Due to a number of the NSW cases crossing the border into Victoria, we have seen Melbourne launch into its 5th lockdown from midnight on Thursday 15th July 2021 and will remain in place for 5 days, subject to further review. This is an all too familiar scenario for Melbourne, and vaccination numbers are thankfully starting to climb, as residents search for a way out of the constant lockdowns.
Next, it’s important to look at what has already happened in both the Melbourne and Sydney property markets recently. Looking over the month of June, Sydney and Melbourne have seen a reasonable uptick, and a similar result was seen over the 12 months to June 2021, even though Melbourne didn’t perform quite as well as Sydney. This is reflected in the two charts below:
Cheap money, in the form of record low-interest rates, a relatively strong economic recovery across the country, and low levels of supply, has all contributed to strong growth right across the country. This has seen some particularly high prices paid for many properties across the two capital cities. CoreLogic’s data suggests that in the second quarter in the lead-up to the end of June 2021, that there were 126,000 new listings of properties for sale but a whopping 167,000 properties sold, signaling that the supply of listings dropped further.
The data suggests that the current lockdowns will have little impact on the overall price momentum of both Sydney and Melbourne. While it may mean that there is less buying activity, past lockdowns have signaled that there is also less supply, which is quite intuitive given that most would be aware it’s not exactly a ‘perfect’ time to be listing your property.
One key factor that we will be monitoring if the lockdowns drag on for too long is the appetite amongst the banks to offer mortgage repayment relief and additional debt facilities for both businesses and property owners. If we start to see a decline in the risk appetite amongst the banks and any mortgage stress, then this may reduce the likelihood of too much further upside in Melbourne or Sydney over the short to medium term.
Overall, based on the current forecasts for the length of the lockdowns, we don’t see any likelihood of a significant impact on property prices. Hopefully, with the uptick in vaccinations, we can soon see an end to these snap lockdowns, and businesses can begin to operate with more confidence moving forward.
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