The extent of the fall in house prices—the more bearish forecasts are more than 20 per cent across the year—will be determined in large part by the length of the recession and how far unemployment rises.
“Capital growth trends will be contingent on how long it takes to contain the virus, and whether additional constraints on business or personal activity are introduced,” Corelogic head of research Tim Lawless said.
“Once the virus is contained, we expect economic conditions to quickly improve, driving a turnaround in consumer spirits which should flow through to housing market activity.
“When that will be, remains highly uncertain.”
If price falls become a material risk to the economy, the government would need to pull the lever on policy intervention, Tharenou said.
The expansion of the first home buyer scheme, temporary reductions in land tax and stamp duty or support for the build-to-rent industry are all potential policy options.
“If price falls do become very significant and potentially a macro-stability risk, we would expect further government support,” Tharenou said.
In its March minutes published on Wednesday, the RBA said it is likely that the “material contraction” in economic activity would spread across the March and June quarters—and potentially longer.
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