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House-buying related searches plummet during pandemic

Almost a month ago, Australia’s federal government banned open homes and auctions as part of a range of restrictions on social contact to combat COVID-19.

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These frictions imposed on the housing market, combined with the likely sharp rise in the number of unemployed (and underemployed), make it hard to see how house prices, which were up 10 per cent from the low in June 2019, can rise from here.

"If this fall eventuates, it would be the sharpest decline in house prices, across a four-month period, since at least 1980.”

The ANZ Housing Search Index (HSI) combines internet search numbers for house-buying related terms. It suggested at the end of March that annual house price growth would turn over by June.

Updating the HSI for April so far suggests by the end of July prices may have fallen sharply – by around 9 per cent from March.

If this fall eventuates, it would be the sharpest decline in house prices, across a four-month period, since at least 1980.

ANZ Research needs to be circumspect in translating the HSI into near-term price movements. It is hard to say for certain that current searching behaviour corresponds with searching behaviour during normal economic times or more typical crises. Australia hasn’t witnessed a partial shutdown of the economy in recent times, so there is a risk the HSI and house prices may not exhibit the same relationship as in the past.

Still, given the plunge in sentiment captured by a number of other surveys, it is no surprise that the HSI has turned down sharply.

Hayden Dimes is Market Economist and David Plank is Head of Australian Economics at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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