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Australian house prices fall, but transaction activity rebounds

Jamie Smyth in Sydney

Australian house prices fell for the first time in a year in May as the coronavirus crisis dented the economy and pushed an estimated 3m people onto government wage-support schemes.

Property values across state and territory capitals fell by 0.5 per cent in May, the first monthly decline since June 2019, according to CoreLogic, a research company. House prices in the two biggest cities, Melbourne and Sydney, recorded falls of 0.9 and 0.4 per cent respectively, while the national index fell by 0.4 per cent.

However, the price declines were lower than some analysts had anticipated and transaction activity rebounded towards the end of May, as social-distancing restrictions were eased in some states due to Australia’s success in suppressing the spread of Covid-19.

CoreLogic said sales activity bounced back strongly last month with weekly auction clearance rates rising from 30.2 per cent in late April to 62.7 per cent in the week ending May 24.

“Considering the weak economic conditions associated with the pandemic, a fall of less than half a per cent in housing values over the month shows the market has remained resilient to a material correction,” said Tim Lawless, Corelogic head of research. “With restrictive policies being progressively lifted or relaxed, the downwards trajectory of housing values could be milder than first expected.”

Australia’s capital city house prices have surged 10 per cent over the past year due to record-low interest rates and looser lending criteria applied by banks. But analysts have predicted house prices could fall by 10 per cent over the next 12 months with unemployment tipped to hit 10 per cent by the end of June.

Australian banks have already deferred payments on 429,000 mortgages under a scheme that provides people with up to six months’ leeway on home loans.

The government is mulling stimulus measures aimed at supporting the construction industry and housing market, according to the Australian Financial Review. The newspaper said buyers of newly constructed homes could be offered cash grants of at least A$20,000 ($13,450) by the government.