Australia house prices fall in May as shutdowns hit property market

Sydney

AUSTRALIAN home prices fell in May for the first time in almost a year as the impact of the coronavirus shutdown rumbles through the economy.

Property values across the state and territory capitals fell 0.5 per cent last month, the first decline since June 2019, according to CoreLogic data released on Monday.

Among the biggest falls were Melbourne, where prices dropped 0.9 per cent, and Perth, which was down 0.6 per cent.

While the relatively mild declines during the height of the lockdown will raise hopes that the hit to the housing market may be less than initially feared, the real test will come later this year when assistance packages are scaled back.

Currently, almost 430,000 borrowers are on six-month payment holidays and around 2.9 million workers are receiving government wage subsidies.

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"Eventually, government stimulus will wind back and borrower repayment holidays will expire," noted Tim Lawless, head of research at CoreLogic.

"In the absence of these policies, housing values could come under some additional downwards pressure if economic conditions have not picked up towards the end of the year," he added.

Activity picked up in May after the property market came to a near standstill in April, when housing inspections and public auctions were banned as part of social-distancing measures. Even so, sales volumes and listings remain below historical averages.

The government is planning to announce a fresh stimulus plan for the building industry, which employs about 10 per cent of the nation's workforce, according to newspaper reports.

Buyers of newly-constructed homes could get grants of at least A$20,000 (S$18,965), the Australian Financial Review said. Direct cash grants for home renovations are also under consideration, the newspaper added.Separately, Australia's No 2 shopping mall manager Vicinity Centres cancelled its dividend on Monday and said that it planned to raise A$1.4 billion, underscoring pressure on the retail sector from the coronavirus outbreak.

The operator of 70 malls said that it would ask corporate investors for A$1.2 billion and retail shareholders for another A$200 million to ensure "flexibility to respond to the uncertainty caused by Covid-19 and the evolving retail landscape", its chief executive officer Grant Kelley said.

The company, which has already withdrawn profit guidance, added that it would withhold an interim payout to stockholders because of upheaval brought by the virus which has infected millions of people around the world, prompting governments to order extraordinary restrictions on personal movement.

The capital raising ranks among the largest by Australian companies amid the pandemic.

While Australia has seen relatively few cases with about 7,200 infections and 103 deaths as of Monday, brick-and-mortar retailers have been among the worst-affected companies with landlords like Vicinity forced to renegotiate leases to match a collapse in sales.

The manager of Westfield-branded shopping malls in Australia, Scentre Group, raised US$1.5 billion last month on the US bond market. Property developer Lendlease, which manages retail assets, raised A$1.21 billion in new shares also last month.

Mr Kelley said that the company would likely cut the value of its assets by up to 13 per cent or A$2.1 billion later this month. The company was continuing to negotiate with tenants, and stabilisation of rent income "remains uncertain".

The company said that foot traffic had improved since mid-April when a nationwide stay-home order was still in effect. With restrictions lifting, foot traffic was now 74 per cent of its level at the same time a year earlier, compared to 50 per cent in April.

Vicinity shares were in a trading halt on Monday while the capital raising was in progress. BLOOMBERG, REUTERS