House prices in the ACT are forecast to fall by 10 per cent this year, research published by the Commonwealth Bank of Australia has revealed.
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Prices in the ACT will fall by more than in nearly all the other state capitals and territories, the bank's economists say. Only Melbourne is forecast to fall further (11 per cent).
The bank's head of Australian economics, Gareth Aird, said house price falls were "inevitable".
At the top of the list of factors was unemployment which he expected to peak at 8 per cent of the national workforce.
"It will rise very quickly but should start falling over the second half of 2020. The sudden spike in unemployment will mean the impact on the property market is immediate but should not be as long lasting," he said.
This forecast chimes with remarks by ACT Chief Minister Andrew Barr, who said this week he expected the city's unemployment rate to double.
Official figures out this week showed a slight rise in unemployment in the ACT - up from 3.3 per cent in February to 3.5 per cent in March - but nobody thinks they paint the true picture because the data was collected before the current movement restrictions and lay-offs started to bite.
The Commonwealth Bank report author said there were factors which might make Canberra harder hit than some parts of the country and not so hard hit as others.
The areas most insulated from the crisis are the ones dependent on mining and agriculture - and that clearly didn't include the ACT.
But Canberra has a high proportion of public servants who were not expected to be as hard hit.
"The Canberra labour market should hold up a little better, given high concentration of public servants," economist Gareth Aird said.
But he emphasised he still forecasts big house price falls and unemployment increases.
"New lending is expected to contract, buyer expectations have adjusted downwards from exuberance to pessimism, rents are likely to fall, auction clearance rates are expected to remain weak and turnover will be lower than usual," he said.
"In addition, the usual underlying demand pulse from net overseas migration has evaporated because the border is shut. The net result means that price declines are inevitable."
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The bank's forecasters can't predict when the economy will start to recover, with house prices ceasing to fall and unemployment ceasing to rise.
"Predicting property prices can look foolish retrospectively and right now it is verging on the impossible given all of the dynamics at play," the report said.
Mr Aird thinks the best-case scenario is where cases of COVID-19 fall to zero or near zero in the coming weeks so "government restrictions on economic activity could start to be lifted by the end of May."
"If that were to occur the plunge in economic activity that we expect would not be as large and the impact on the property market would not be as severe," he said.
But there is a bleaker scenario and that is where restrictions are eased but a second wave of infections happens.
"We would see restrictions return but the hit this time around on the economy and labour markets would be more significant and the damage would be longer lasting," Mr Aird said.
"Falls in dwelling prices far greater than our central scenario would be plausible."
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