The financial crisis: Why our economic recovery has been faster than expected

While Australia experienced its biggest economic contraction in the June 2020 quarter since World War II, it only took six months for us to come out of it.

Fresh GDP data shows that the economy leaped back by 3.3% in the September quarter, thanks largely to the easing of social distancing measures and trading restrictions, according to the Australian Bureau of Statistics.

Our country has had a record 28-year run of uninterrupted economic growth. This strong economic standing helped us pull the brakes on the recession a lot quicker than expected. Despite international borders remaining closed and some social distancing restrictions still in place, we can be certain that Australia’s economic recovery is well underway.  

Property market sees upturn

Bricks and mortar have been the backbone of Australia’s economy. 

CoreLogic’s latest data indicates that November has been the second month in a row where property prices have increased, with national housing values up by 0.8%. 

To put this into perspective, in October, prices went up for the first time in five months by 0.4%. The pace of growth has doubled in just a month. 

Tim Lawless, CoreLogic’s Head of Research, is optimistic about the figures and said the property market could recover from its COVID-19 declines by next month.   

“The national home value index is still seven tenths of a per cent below the level recorded in March, but if housing values continue to rise at the current pace we could see a recovery from the COVID downturn as early as January or February next year,” he said. 

“The recovery in Melbourne, where home values remain 5% below their recent peak, will take longer. ”But in what is no doubt an early Christmas present for Melbournian homeowners, green shoots are starting to appear. 

The city’s property prices edged up by 0.7% in November – making it the first month Melbourne has seen property price growth since April.   RBA, government, and bank intervention.

RBA, government, and bank intervention

The property market has been held up thanks to efforts from the Reserve Bank of Australia, the government, and the banks.

The RBA cut the cash rate to 0.10% in November. In the last RBA meeting for 2020, the rate was left on hold, encouraging low interest rates in the mortgage market. This is helping to drive up prices, supporting the housing market, which is even likely to heat up in the months ahead. 

For first home buyers, saving for a deposit may be difficult with such low interest rates. But on the flip side, low rates will also help make it more affordable for them to pay off a home. Plus, the unprecedented number of government incentives on offer has given first homebuyers a valuable leg-up in the property market.   

In Victoria, the state government is using policy to fuel the property market post-COVID. Stamp duty is temporarily being slashed by 50% for new homes under $1 million and 25% for existing properties untilmid-2021.

The banks have also played a key role in preventing a major property market crisis. Banks provided mortgage deferrals to help curb forced sales, which would likely have pushed up supply in the market, putting downward pressure on prices. Most property owners who lost their job or had their income significantly reduced were not forced to sell their home, thanks to mortgage deferral schemes. 

Concerns of a “financial” cliff appear to have faded. Most of those who paused their home loans are back on track with their mortgages. Home loan deferrals have dropped by almost 70% since late June, new data from the Australian Banking Association revealed – from about 436,000deferred in June down to 145,000 in November.

Future forecast

January will not be a traditional January. Thanks to prices picking up coupled with the strong housing market sentiment, there will be plenty of activity in the traditionally slower start of the year. The market will not really “close”. 

Expect the Mornington Peninsula and other holiday destinations to be a hive of activity in the coming months. As no one is going skiing in Europe this year, there will be a lot more time (and motivation)to go beach house hunting. There will also be a continued focus on tree changes, with our briefs concentrated on these properties at the top end of the market. 

While the market’s recovery is showing promising signs, some market uncertainty is still lingering. This has encouraged serious buyers to turn to off-market properties, in the hopes of maintaining close control over a potential purchase.

A property expert can help

With the real estate market brewing up a perfect storm, now could be an opportune time to think about a purchase. 

Having an expert on your team can put the odds back in your favour if you’re unsure of how to get to where you want to be. 

With access to exclusive off-market properties and market-leading expertise, we can help you pave the way through uncertainty during these unique times.