The spread of the coronavirus is having a devastating effect globally - on people, on jobs and on the economy. While it’s too soon to tell what impact it will have on house prices in New Zealand, with meaningful data still some weeks away, housing market figures from around the world give an indication as to what could happen - and also, more importantly, is unlikely happen.
Markets that went into lockdown strong have fared better than those that were in a weaker position, and Australia’s property market was well into recovery in the first quarter of 2020, which is a positive sign.
It’s also important to note that Australia, like New Zealand, is in a very different health position than other countries such as the US, Britain and Italy, as it has a much lower rate of death and infection. Its lockdown is less stringent than the one in New Zealand but there has been a tightening of rules. In Victoria, private inspections of homes that still have people living in them were banned last week - although in other states agents are allowed to continue booking private inspections with prospective buyers and tenants.
Bans have been placed on inspections of occupied homes in Victoria.
The president of the Real Estate Institute of Victoria, Leah Calnan, believes the move by Victoria will a big impact on the housing market. “The real estate industry contributes close to 50 per cent of the state’s income, via means including stamp duty and land tax. To be advised at 5pm the day before Good Friday that agents can no longer conduct inspections on occupied properties is disgraceful.”
The number of scheduled online auctions in Australia has been far fewer than what experts would normally see scheduled but, as in New Zealand, the industry is still transitioning to new ways of selling, so a bigger uptake of online auctions may take place as it becomes the new norm.
The New York property market started the year particularly strong. In the first quarter of 2020, the number of sales was up 13.5 percent compared to the same time last year, although the median sale price was down 1.2 percent.
New York’s real estate industry has come to a standstill due to severe lockdown measures.
The shutdown in New York came relatively late and high levels of activity continued until about in mid-March. New York now has a strict lockdown in place, which means that real estate agents can’t work, and it is not possible to do an in person showing of a property.
Last week, only two properties sold at the luxury end of the market in New York (US$4m+), dropping to the lowest level since the Global Financial Crisis.
Italian transactions fell by 8 percent in February, well before the lockdown began, although the property market in Italy's north, where the infection and death rate was highest, had been on course for a solid first quarter.
The coronavirus’ impact on buying sentiment is likely to last well beyond the lifting of lockdown measures, with Airbnb landlords and the second home market most at risk.
Italy’s housing market was down before the lockdown measures came into effect.
“Normally during a crisis, house prices drop at half the rate of the stock market,” says Roberto Magaglio, managing partner of Engel & Völkers in Milan. “In 2008, the Milan stock exchange fell by 50 per cent and Milan property prices fell by 25 per cent.” Currently, Milan's stock market is about 30 per cent below its February levels.
In the UK, a recommendation on March 22 ordered that people do not move house. Available data on what is happening has been easier to come by and the number of new homes listed is only down one per cent, despite the restrictions.
Heavy restrictions in the UK have prevented people from moving home.
There have been no mass withdrawals of homes, but transactions are far fewer and are now down 70 per cent. Although, it is surprising there are any given the severity of restrictions.
There is a lot of data coming out on the impact of Covid-19 in China, where the country was in virtual lockdown from the end of January.
New housing starts fell 45 per cent due to quarantined construction workers over January and February, while property market investment fell 16.3 per cent.
House sales fell 40 per cent, but surprisingly, property values rose 5.8 per cent in February, only slightly down from January at 6.3 per cent.
Source: Realestate.com.au, with OneRoof.co.nz and telegraph.co.u