Will the end of government support affect the property market?

With the end of JobKeeper and other Covid-19 support measures due to finish at the end of March, what’s expected to come for the property market? The economy is powering ahead and Australia is no longer in recession: experts suggest as a whole the housing market will prevail.

After helping the Australian Economy and housing market through out a once-in-a-century pandemic, the Government’s support schemes currently in place are set to withdraw at the end of this month. Chief Economist for Realestate.com.au, Nerida Conisbee, has advised the withdrawal of the support is likely to have minimal impact on the housing market, stating “house prices are moving quickly now and even in areas where rents are dropping, values are increasing.” Nerida Conisbee also suggested rents are returning back to normal, particularly for houses, with investor participation increased and banks lending more easily. The way it’s seen at present is that there is no looming fiscal cliff like there would have been had the measures been cut off as initially planned in September, but there may still be an impact on some people and some areas of the property market.

The JobKeeper wage subsidy, HomeBuilder scheme, loan repayment deferrals and the coronavirus boost to JobSeeker unemployment benefits all finish at the end of March, as do most of the remaining rental eviction moratoriums. The measures and record low interest rates have led to Australia’s economic recovery being faster and stronger than expected. The housing market has also been more resilient than what was expected, with housing prices rising across most of Australia.

Why won’t the withdrawal of support dent house prices? A number of economists have forecast property prices will grow by 5-10% both this year and next, with some forecasting a sustained housing boom and 20% growth by the end of 2022. This stronger-than-expected momentum in the housing market and economic recovery are expected to offset the impact of the winding down of the income support measures and loan repayment holidays. But whilst overall the housing market will see minimal impacts as a result of the wind down of stimuli, some housing types will undoubtedly be exposed. People dependent on JobSeeker and JobKeeper will be worse off, particularly those who are located in areas where there is currently a rental housing shortage. In areas where there is an oversupply of rental housing, we may see a hit on rental levels, which could impact landlords.