Back from the dead: Housing small caps have gained an average 8pc in the past month
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The property market in Australia might not be as badly hit by COVID-19 as initially feared. The value of home loans fell 4.8 per cent in April, but economists were predicting falls double that.
The overall market is holding up. CoreLogic data shows capital city home prices have risen in the last 3 months except in Melbourne, which has seen a modest 1.3 per cent decline.
Bloomberg Intelligence analyst Mohsen Crofts argued yesterday there would still be an impact but it could be limited to no more than 5 per cent.
“Australian home prices have dipped only slightly since the pandemic began, as strong pent-up buyer demand and intractable sellers have kept discounting to a minimum,” he said.
“In the longer term price rises may be constrained as the outlook for wage growth remains challenging and the central bank has little room for further interest rate accomodation.”
Crofts said there could be a bigger impact if a second COVID-19 wave hit or unemployment persisted.
Small caps in the property sector have overall gained 8 per cent in the last month and the majority are in the green.
There are some signs of underlying economic conditions in this ASX sector.
One example of the strength of refinanciers as opposed to new home buyers. On one hand real estate agent McGrath (ASX:MEA) has only gained 20 per cent since late March. On the other, mortgage brokers Mortgage Choice (ASX:MOC) and Australian Finance Group (ASX:AFG) have gained over 40 per cent in that time. The latter’s rise came despite a capital raising in May.