NAB has forecast a $100,000 loss to the price of Melbourne’s typical house.
One of the nation’s big four banks has warned Melbourne’s typical house price will lose more than $100,000 due to COVID-19.
NAB forecasts released yesterday tip a 10 per cent plunge this year and another 4 per cent drop in 2021, for a combined 14 per cent virus-led hit to the city’s house prices.
The predictions indicate Treasury estimates of a 9 per cent fall over the next 12 months do not capture the full span of the crisis as it spreads into 2021.
For a $732,000 median priced house, according to latest realestate.com.au figures, the NAB forecast works out to a $102,500 loss over the coming two years.
Only Brisbane has a worse NAB forecast, with figures there estimated to fall 14.1 per cent.
NAB chief economist Alan Oster said the home price hit was now unavoidable and we would be left to watch as the crisis slowly came to a peak in two years time.
“The damage has already happened within the last four weeks,” Mr Oster said.
“We are now expecting that house prices will drop as population growth slows — nobody is moving here because the borders are closed.”
Melbourne could spend years watching property prices fall following COVID-19.
The projected losses would wipe out any gains made since Melbourne’s last correction in the aftermath of the financial services royal commission.
“Basically, you are back to where you were some time ago — and unfortunately, unemployment is going to be awful too,” Mr Oster said.
Despite this, he said Australia and Melbourne’s property markets were in a better position than most of the rest of the world and those who sold sooner might beat the worst of the falls.
“(And) if I was buying I’d be thinking about it now, as there will theoretically be people under stress — next week we are expecting 10 per cent unemployment,” Mr Oster said.
22 Neil St, Sunshine sold $170,000 above its reserve at an online auction.
However, realestate.com.au chief economist Nerida Conisbee said after stronger than expected figures in April and search trends data indicating buyers were still active enough to maintain a high level of demand against the shrinking number of homes for sale, the dire predictions could prove extreme.
“That seems a lot to me,” Ms Conisbee said.
The fate of Melbourne home prices would rest on whether banks ended a six-month mortgage freeze period for COVID-19 affected homeowners by forcing some owners into distressed sales, and if Victoria’s lockdown extended significantly beyond the rest of the nation, she said.
The Herald Sun has reported several instances of homes selling above expectations in the past week, including multiple homes that sold more than $100,000 above their reserve in online auctions.
56 Josephine Ave, Mt Waverley also sold more than six-figures above expectations recently.
The NAB figures show unit owners will not see the same level of losses, with expectations values in that part of the market will fall a more modest 8.4 per cent over the next two years.
It follows a separate report from finder.com.au released earlier this week, forecasting prices would fall 9.2 per cent for homes across Melbourne this year.
Those figures reflect the expectations of the nation’s Treasurer, who has advised a 9 per cent drop as a result of the pandemic.
Others have predicted the drop could be as high as 30 per cent.
Half a dozen buyers pushed the price of 4 Visage Drive, South Morang well above reserve.
NAB also released a commercial property report yesterday, which revealed the CBD’s hotel industry was expected to be the hardest hit.
However, Mr Oster warned the conditions would be tough in all sectors of the commercial property market.
“This makes the GFC look like nothing,” he said.