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The chief economist at REA Group has observed that the property market has remained largely stable despite the economic impacts of COVID-19.
In a video episode of The Adviser’s In Focus (partnered by Smartline, of which REA Group is the parent company) the group’s chief economist, Nerida Conisbee, said that while there was a lag effect on the housing market, it was largely “business as usual” despite the economic effects of the coronavirus outbreak.
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According to Ms Conisbee, Smartline data shows that activity is still occurring in the mortgage market, which she said was a positive indicator.
“We haven’t seen a huge drop-off in mortgages, there’s still activity occurring,” she said.
“Interestingly, a lot of refinancing has been taking place, so people [are] taking advantage of the fact that we’ve got these record-low interest rates and banks are open for business and they are offering great deals.”
Ms Conisbee also observed that there is a mismatch between buyer activity and properties for sale in the housing market. Consumers are still seeking to purchase property but that is not being matched by properties for sale.
“We’re seeing very high levels of search on our site at the moment, which surprised me. I didn’t really expect to see so many people out there looking to buy,” Ms Conisbee said.
“We’re seeing high levels of enquiry as well, [which], again, I thought was maybe [because] people are searching because they’re bored at home and got a lot of time. But they are enquiring as well so that’s a really good sign.
“But we’ve got this incredible drop-off in property for sale.”
The result of this imbalance between supply and demand is that it seems to be stabilising the property market, but Ms Conisbee warned conditions would worsen.
“We don’t know for sure exactly what will happen with these very high levels of unemployment. But I think what’s helping with the stress among home owners is the six-month mortgage freezes, very low interest rates and stimulus,” she said.
“There are all these things that are really helping people at the moment, which isn’t leading to the catastrophic conditions in the property market we otherwise would’ve seen if all those things weren’t available.”
Shifting perceptions of brokers
The COVID-19 pandemic could remove the focus away from brokers, who have been heavily scrutinised in the aftermath of the banking royal commission, Ms Conisbee opined.
She noted with surprise that the royal commission turned the focus on to brokers, which she said seemed “very unfair” at the time.
“I found it quite surprising that you go through this massive royal commission and suddenly brokers are an issue. It seemed quite strange,” Ms Conisbee said.
“I think that focus on brokers will probably be removed a lot more than it may otherwise have done if we hadn’t have gone through COVID-19. But also, I guess the role of the broker is going to continue to be very important.
“People do need help going through the home loan process, and even if they don’t need help, they can do it themselves, it’s such a great offering.”
Strong FHB activity
Ms Conisbee said first home buyer activity has remained positive while, conversely, activity from investors has been more subdued.
“It seems surprising, but it’s not really. One of the things we can see is that first home buyers don’t like fast-moving markets. When they’re in fast-moving markets, they seem to pull back a little bit. They don’t like investors. Investors and first home buyers do tend to target similar properties, so that’s a good thing for them,” she said.
In addition, the various grants and schemes such as the First Home Loan Deposit Scheme have significantly benefitted this cohort, she added.
On the other hand, property investors seemed to have pulled back under the current environment, and Ms Conisbee is not seeing much enquiry or search activity from them.
Government measures such as the six-month ban on evictions and declining rental rates are keeping them at bay.
“They were starting to come back in February/March. They kind of disappeared during the financial services royal commission and this has really pulled them back again,” Ms Conisbee said.
“They’ll be back, but I think it’s just a period of adjustment for now.”
Tune in to watch the full interview with Nerida Conisbee.
[Related: In Focus: Economic insights with Nerida Conisbee, REA Group]
