Home owners, investors and real estate agents are all wondering how much will property values go down during the recession?

Most industry insiders are suggesting a drop of 10-15 percent in property values over the next 12 months.

What is this estimate based on? Our most recent comparison is the Global Financial Crisis which affected property values on the Gold Coast from 2007 to 2009.

A recent article by Dymphna Boholt (iloverealestate.tv/the-projections-i-shared-with-my-inner-circle) shows a chart that suggests property prices may decrease by 15% then rebound within 2-3 years, as below.

Dymphna Boholt makes the point this is not a forecast, it’s just an exercise in trying to learn from history. History doesn’t always repeat but it often rhymes.

Similarly, an article from CBRE states:

‘A broad 10 per cent pricing decline in 2020 is not an unreasonable scenario, with risks on the downside.

History does show, however, that in past economic shocks, residential property in Australia has proved resilient.

Beyond an initial 12-month period of decline, economic recovery and renewed confidence releases pent up demand and drives rebounds in both sales volumes and pricing.’

(cbre.com.au/covid-19/Australian-Market-Snapshot-Past-Shocks-and-Impacts)

The National Australia Bank ‘Quarterly Australian Residential Property Survey’ released 7 May 2020 indicates:

‘Our view is that house prices across the capital cities to fall by 10-15% over the next 12-18 months. While both the depth and duration of the downturn remain uncertain, we expect a sharp fall in economic activity in the near-term, followed by a rebound.’

(business.nab.com.au/nab-quarterly-australian-residential-property-survey-q1-2020)

So the consensus from industry insiders suggest residential property values are likely to decline then rebound as the economy starts to recover after the lockdown measures are lifted. For people wanting to upgrade, and for property investors, the next 12 months could be the ideal time to buy.

Karl Grossman, 8 May 2020

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