DEVELOPER Crown Group has seen buyers pick up more than $42 million worth of off-the-plan apartments in seven weeks as they scramble for the security of bricks and mortar.
This includes the sale of an apartment this week for $3.67 million at its Waterfall project in Waterloo which is being completed this month.
Recent economic conditions have prompted the lowest interest rates in history and a favourable exchange rate, causing many buyers to jump on a good deal now to lock in a new home or investment property.
“History tells us that housing generally does relatively well in Australia in times of economic uncertainty, as people seek out bricks and mortar because it’s seen as a safe bet,” Crown Group chief operating officer sales & marketing Prisca Edwards said.
According to an ABC news report, home prices declined in the last Australian recession by around 4% in 1990, and dropped in only one of the five years following the financial crisis of 2008, by 4.8% in 2009, before rebounding 2.1% and 9.3% in the following two years.
“We expect that with the economic stimulus measures and an expected economic rebound later this year, this principal will again hold true – property prices will climb out of this crisis,” Edwards said.
Capital Economics this week predicted house prices would peak in the second quarter before falling by 5% to 10%. Economist Marcel Thieliant said the federal government’s ban on the sales of homes via auctions as well as open house inspections to limit the spread of the coronavirus would drag down home sales, while banks are facing rising funding costs and mounting loan losses and are likely to tighten lending standards, leaving what happens once the pandemic is over is also unclear.
He noted that the housing market had experienced strong momentum in recent months, while past episodes of rising unemployment paint a “mixed picture”. He said that given inflation is now much lower than it was during the 1980s and early 90s, latter episodes such as the GFC and mining downturn provided a better guide for what is to come.
AMP Capital chief economist, Shane Oliver, said the Australian housing market is at risk from the coronavirus recession Australia has now entered. A relatively short recession that sees unemployment rise to around 7.5% would likely only set prices back around 5% or so, after which prices would bounce back, but a deeper recession with 10% unemployment “risks tripping up the underlying vulnerability of the housing market around high prices and high debt levels”, and could see a 20% fall in prices, albeit this not AMP Capital’s our base case.
Edwards said there is an undersupply of new homes looming in certain parts of Sydney right now, and people feel they need to act fast to secure an apartment because they don’t know when more new homes will come online.
According to JLL research, inner city apartment supply peaked towards the end of 2018 and across the entire city in 2019, and Sydney vacancy rose above 3% last year for the first time since 2004.
She said overseas buyers are taking advantage of the low Australian dollar to make a significant saving which could be up to 14% for those holding or saving in Hong Kong and Singapore, or 40% for those with money in the US, depending on the timing.
“Some see a degree of urgency – they want to secure a property now in case the situation changes with the banks. They want to strike now while the iron is hot.”
Personalised virtual site tours for each of its display suites have been filmed in English, Mandarin, Cantonese and Indonesian, and online appointment schedules and tours are being set up.
Crown Group is marketing apartments at five developments across Sydney, including Mastery, Eastlakes Live, Infinity, Arc and SKYE in North Sydney.