The current economic and health crisis is unprecedented, which can reflected by the number of job losses during the last few months, as well as the number of mortgage deferrals that were approved by the lenders, which amounted to around 440,000 loans.
The path out of this crisis will depend on a range of factors, including the successful development of an effective vaccine, as well as how quickly businesses will recover. Additionally, the business models that businesses will choose will be an important factor that will determine how many unemployed would return to the workforce.
As a data-driven company, we look at the past episodes to explore how the economy emerged out of an economic downturn:
2008: Global Financial Crisis
2012: the tightening of lending policies
2018: the tightening of lending policies, increasing tax rate to foreign buyers
The worse case is that the property market will repeat the past episodes, then the forecasted price growth will be as in table 1. We estimate that the price growth will return to its long-term growth path by 2022.
Table 1: Worst Case Scenario
Assumptions:
2020 will repeat the previous market downturns in 2008, 2012 and 2018
2021 will repeat the recovering path after a downturn
2022 return to long-term growth
The moderate case is that the severity of the current crisis will be equal to a haff of the past crises, thanks to the rapid development of an effective vaccine by the end of 2020/early 2021. Then the forecasted price growth will be as in the table 2. We estimate that the price growth will return to its long-term growth path by 2022.
Table 2: Moderate Case - With repayment deferrals, government cash assistance and a successful development of a vaccine
Assumptions:
2020 will repeat the previous market downturns in 2008, 2012 and 2018/divided by 2
2021 will repeat the recovering path after a downturn
2022 return to long-term growth
To sum up, it is surely that the current crisis will cause a downturn for the Australian property market. However, in the long-term, probably the next few years, the economy will likely return to the fundamental growth path, so the property market.
Get in touch to find out how we can help you with your property journey.
If you like this post, we’d love it if you could share :)
Disclaimer: All data and information provided on this site are for informational purposes only. Milk Chocolate makes no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.
