But while the length and severity of this downswing are unknown, experts suggest people should take a longer view of property, as evidenced by the growth experienced in the decade following the Global Financial Crisis.
“Cities like Melbourne and Sydney see price drops because of various things,” said chief economist at realestate.com.au, Nerida Conisbee.
“But given that prices do tend to go up, it always pays to hold long term and kind of ride through the cycles as opposed to trying to pick the bottom and top of a cycle, which is very difficult to do,”
There are widespread predictions prices will drop by up to 10 per cent or more in the coming months. However, Ms Conisbee believes many forecasts are already looking “quite wrong”.
At this stage, we don’t know what affect COVID-19 will have on the property market, but as Ms Conisbee suggests, any changes “will not be set in stone”.
What suburbs have grown the most since the GFC?
Between May 2009 and March 2020, North Melbourne was that city’s top performer, with price growth of 212 per cent and a median house price reaching $1,182,000. The south-eastern suburb of Sandhurst was next, with 161 per cent growth and a median house price of $810,000.
One of the more obvious reasons why some suburbs recorded such strong price growth was the introduction of new developments, said Ms Conisbee.
“An example of that would be somewhere like Sandhurst, which has gone from being an outer-suburban area with not much housing to having lots of really nice quality homes.”
“Then you’ve got places like North Melbourne, which have become far more popular because of their location – inner-city, close to a hospital precinct, close to universities and as a result, it’s seen incredible growth over the past 10 or so years.
Similar to North Melbourne is Willoughby, on Sydney’s north shore, which since the GFC had a 169 per cent jump in house prices, bringing the median house price to $2,459,500.
“Willoughby was already a really nice suburb but it has seen this incredible growth because it’s kind of inner and it has got good public transport,” Ms Conisbee said.
She said other areas in our capital cities have become more popular for unknown reasons.
“The Adelaide Hills region in particular has seen lots and lots of interest in South Australia. We’ve been seeing that on the site with those areas really picking up in terms of views per listing and that’s obviously flowed through to pricing.”
Median house price growth over the past 22 years
Overall, Sydney has seen the biggest growth in median house prices since the GFC, which has a lot to do with the levels of new development, Ms Conisbee said.
“Melbourne hasn’t seen the same big increases in pricing as Sydney has primarily because Melbourne is far better at building new homes, so even though Melbourne is a growth city, it builds lots of housing.
“Then you go to Perth, where house prices went up during the mining boom and then the mining boom ended and they came down again. So different things have an impact [on property growth].”
Ms Conisbee added, population growth, economic growth and levels of supply in the property market have also contributed to median house price growth since the GFC.
What should buyers be focusing on for long-term growth?
It’s important to consider growth economies when it comes to buying for long-term growth, said Ms Conisbee.
“Some small country towns are very cheap, but the reason they’re cheap is that their economies are stagnant or they are declining,” she said.
“Buying in many capital cities, however, can make a lot of sense. If you have a look at somewhere like Sydney, it not only sees good economic growth but it’s also a city that doesn’t build much housing, so that’s really protected house prices.
“At a suburb level, it gets to things like how well located the suburb is, whether it’s got good public transport, good retail and good schools, typically areas located close to the city [have better long term growth].”
Ms Conisbee also suggested areas with large elderly populations are ones to keep a close eye on because they could be gentrifying.
“Typically what happens is that younger people buy older homes and do them up, so you’ve got an uplift in terms of the quality of housing, but then you also see the local area improve as well,” she said.
“Shops start to do a little bit better… the schools improve and there starts to be a whole regeneration of the suburb. Somewhere like North Melbourne is a good example of this.”
Ms Conisbee added it’s hard to predict the areas that will have the best long-term price growth in the coming decade, but there are some signs that can help buyers.
“Somewhere like Sunshine [in Mebourne’s West], which just five years ago was seen as a very rough working class area, I am now hearing of young people moving there and I think that area will start to change.
“Similarly, we’ve seen this massive change in Geelong and suburbs like Newtown have really picked up because they offer a Richmond kind of lifestyle but at a far cheaper price.
Sydney buyers advocate and chief executive of Trelease Associates, Daniel Trelease, said it’s important to focus on “micro-markets” when considering the next growth areas.
“We don’t try to pick or predict the next growth pocket. Just in the Eastern Suburbs alone, there are micro-markets, it’s these micro-markets we focus on – villages, beaches,” he said.
“If you can’t afford to live in Bondi or Bronte, you’ll look at Coogee, South Coogee, Maroubra, even the Randwicks and Waverlys – so there is spill over, or flow-over, into neighbouring areas around our most blue chip locations.”
But anywhere close to Australia’s capital cities are a safe bet when it comes to long-term price growth, suggested Real Estate Institute of Australia president, Adrian Kelly.
“Most suburbs around large and medium-sized cities have always experienced long-term growth, and that’s right across the country,” he said.
Is now the right time to buy?
As Australia, and the world, continues to grapple with the coronavirus crisis, it’s understandable that many homebuyers might be sitting on their hands, especially if their employment has been left hanging in the balance.
But for those with more security in their job and financial future, now might be a good time to get in to the market, according to Mr Kelly.
“It makes sense to me to be buying when a real estate market is at the bottom of a cycle – I’m not suggesting that we’re at the bottom of a cycle, but we’re certainly not at the top of one,” he said.
“In this market there’s certainly less competition for properties, particularly in those states which have closed their borders.”
In terms of getting a bargain, Mr Kelly suggested homebuyers shouldn’t hold their breath.
“When our real estate market takes off again, it’s likely that prices will follow suit,” he said. “We don’t see that prices across the board are going to fall away dramatically and that’s largely because of lower stock supply levels at the moment.”
Mr Trelease said he believes the current climate shares similarities with the GFC including fear, rushed or ill-informed decisions, and now is the time to leverage the market and buy strategically.
“For the masses, this isn’t a time for speculative acquisitions with higher risk profiles,” he said. “Less gentrified areas or higher risk profile opportunities, whether that be newer stock or more affordable, are not the priority in a market still clouded with some uncertainty.
“In my opinion, the opportunistic and/or savvy investors are starting to engage now. In the next few months, I believe [homebuyers] will have missed the bottom of the market.”