Although falling property prices have not materialized, many parts of the Australian property market are feeling the effects of the pandemic.
The Mandurah region experienced the largest decline in Perth, dropping 2.2% from March 31 to May 31, according to CoreLogic.
It and the southern interior region of Melbourne, which also fell by 2.2%, were the worst performers in the country during the period considered.
Housing values in Mandurah were 38% below their peak in 2006 at the end of May this year and the new downward pressure comes just after the Perth market started to see growth as long as expected in early 2020.
Eliza Owen, research manager, said the region’s continuing decline was surprising.
“Analysis of ABS payroll data suggests that payroll job losses in Mandurah were 6.0% between mid-March and late May,” she said.
“This is not particularly serious with regard to the loss of jobs in the regions of Perth, and Mandurah would not have been particularly sensitive to a demand shock due to a drop in migration abroad.
“However, the decline in home values is the result of a longer-term downward trend, suggesting that demand conditions were already fragile in the region.”
The border closings could have had an impact on the southeast region of Perth, which recorded a 1.2% drop in the past two months.
Owen said the region has recently been almost entirely dependent on net overseas migration for demand for new housing.
“ABS regional population growth data for 2018/19 suggests that internal migration during the year was negative, compared to around 4,500 net arrivals of migrants abroad,” she said.
“The closings of international borders in response to COVID-19 may have created a significant demand shock that had interrupted a recovery in the Perth – Southeast region.
“Before that, the value of housing in the region had experienced four consecutive months of growth between December 2019 and March 2020.”
Northwest Perth posted a 0.3% decrease, while the Northeast remained stable and the Southwest 0.1 and Inland regions saw increases of 0.1 and 0.5% respectively
Figures for June are expected later this week and Owen said that while results for the National Home Value Index in May showed the housing market fell only 0.4% during this month, preliminary indicators for June showed that the rate of decline had gathered some momentum.
“As the wider economic downturn slows demand for housing, slight price decreases are expected to spread, resulting in a more general slowdown in the next 12 months,” she said.