Despite recent significant falls in Sydney and Melbourne house prices, property experts say the worst may be over and dire predictions of a COVID-19-induced crash appear overblown.
Some industry watchers had forecast slumps in residential property prices of up to 15 per cent nationally from peak to trough.
PEXA, which collects real-time property transactions on its e-conveyancing platform, says residential values fell 9 per cent in NSW and 14 per cent in Victoria in the first nine months of 2020.
However, other industry researchers say figures sampled during the pandemic came during a period of very low sales activity and should be viewed with caution.
Temporary banning of on-site auctions slowed the number of listings in Sydney and the property landscape was even worse in Melbourne, where lockdowns all but brought sales to a halt.
Louis Christopher, managing director of SQM Research, says it is hard to determine what is going on during times of low sales activity and "you have to be very careful" with interpreting sales data.
"We do think, however, the darker scenario of a house price crash has now been averted," Christopher says.
Sydney and Melbourne auction numbers and clearance rates are now on the rise again, which should provide greater clarity on what is really happening with prices.
"The lead indicators of listings – clearance rates – and asking prices suggest the market is starting to look up in Sydney," Christopher says.
"But I think that Melbourne still has a lot of challenges ahead because the economy has been hit hard and that's not good for house prices," he says.
CoreLogic figures show there were where 505 homes taken to auction in Melbourne last week. It was the busiest week seen since July, with a preliminary clearance rate of 72.6 per cent.
In Sydney, over the same period, there were 712 properties auctioned with a preliminary clearance rate of 80.4 per cent.
That is a far cry from thin volumes and clearance rates as low as 30 per cent recorded in both cities during the first wave of the pandemic earlier this year.
CoreLogic figures show Sydney prices are up 1.5 per cent so far this year, while in Melbourne, prices are down about 3 per cent.
However, questions have been raised about the accuracy of auction market figures as a result of sellers withholding or delaying "bad" sales and auction results.
CoreLogic says it has "very high confidence" in the quality of its property price index.
Christopher suspects recent price declines in Melbourne are particularly centred on the CBD apartment market, with some likely price rises in outer-ring suburbs and regional Victoria.
"But sales transactions have been far and few between, really from March... and we will get a better sense of what is going on [in Melbourne] as listings increase, he says.
SQM Research price indexes show for Sydney, where listing volumes have been stronger, house prices have fallen about 3.8 per cent from their peak earlier this year. Unit prices have fallen by about 6.8 per cent, with the biggest falls for CBD apartments.
Shane Oliver, chief economist at AMP Capital, says national house prices could fall by another 5 per cent into next year because of high unemployment, little or no immigration and weak rental markets.
He says prices are being supported by government income-support measures and mortgage repayment deferrals. These are measures that will taper off over the next six months.
Oliver expects property prices in smaller cities and regional areas to do better than their city counterparts.
Financial markets are expecting the Reserve Bank of Australia to cut the official cash interest rate to 0.1 per cent, from 0.25 per cent, when it meets next on November 3.
The extent to which that buoys the property market will depend on how much of any cut is passed on to borrowers by the big banks as lower mortgage interest rates.
* Source - SMH - John Collett