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The development of Covid-19 pandemic was rapid. January saw a disquieting accumulation of news reports regarding a new disease originating in Wuhan, China that had claimed several lives. Three months later, the new coronavirus has triggered a global crisis as countries everywhere scramble to contain the virus.
Social distancing measures have been implemented at a scale not seen before, with nation-wide lockdowns and business shutdowns prompting widespread concerns over the economy. In Australia, as day-to-day business dealings dwindle and people retreat into their homes, only venturing out when necessary, unemployment rates are stacking higher. For the first time in thirty years, the Australian economy has been yanked into a recession.
Amidst the chaos, the stability of our housing market is under more scrutiny than ever. Currently, the housing market has yet to see significant impact on prices. March even recorded a 0.7% increase. However, this means little in the face of a global pandemic. Recent market trends have become unpredictable and less relevant.
This is largely due to social distancing measures that have been implemented—in particular, the banning of open homes and public auctions, cutting down national auction volumes. Just this week, Corelogic recorded 45% of auctions withdrawn from the market. Withdrawn auctions typically comprise of 6% of all auctions in a week.
Social distancing measures are not entirely to blame for this, however. Market sentiment is currently more cautious than ever, as households hold off on major financial decisions with the looming threat of unemployment and the stifling instability that has gripped the global economy. The impacts of the Covid-19 crisis are speculated to push the national unemployment rate from just over 5% to 12%.
All this considered, it is no surprise that the federal government's concern has been focused on minimising the adverse impacts of the Covid-19 pandemic on unemployment and wages as best as they can. As one of Australia's largest full-time employers, the construction industry appears to be bearing the brunt of this focus.
The Dilemma of the Construction Industry: Economy vs. Safety
The Morrison government considers construction sites an essential service, thus they remain open throughout the lockdown. In an effort to minimise the potential for Covid-19 infections on-site, 'staggered shifts and break times as well as site-wide decontamination' have been implemented across the country.
Furthermore, the NSW government has extended work hours so that construction sites can operate over weekends and public holidays. The government reasons that by allowing the work to be spread across more days of the week, workers may follow social distancing measures while more effectively compensating for lost productivity.
In Melbourne, a similar ruling has been implemented, in addition to extending work hours during the weekdays.
Yet despite PM Scott Morrison's assertion that social distancing measures can be practised on construction sites, whether residential or commercial, Builders Collective of Australia president Phil Dwyer maintains that that is not possible. He is critical of what he considers to be a disregard of workers' health and safety in this situation.
Nevertheless, Dwyer appears to also be aware that the consequences of an industry-wide shutdown may have equally damaging impacts on workers' livelihoods as well as the broader economy.
Indeed, Morrison's hopes that the impacts of the virus on the national economy can be mitigated is countered by the recession as well as the shortage of building materials in the building supply chain, as a result of limited movement currently available.
The Economy of Covid-19
The current economic outlook appears bleak, ravaged by recession and volatile markets due to the unpredictability that can only be expected during a global pandemic. Yet many experts assert that a quick recovery can be expected once the virus is contained—it is only a matter of when that is.
This is because the lockdown places 'socially created restriction on our movement and assembly', and thus, has no impact on our economy beyond the most superficial layer of suppressing levels of activity.
In the meantime, Eliza Owen, head of Corelogic's residential research team expects a reduction in property values as income and borrowing capacity tightens, as well as a plummet in market sentiment. She also predicts a diminished housing supply as the current instability discourages home vendors from selling.
Government support can also be expected, should price falls threaten macroeconomic stability, according to UBS analyst George Tharenou. With the real estate market comprising of such a significant portion of the Australian economy, the government is likely to prop up the industry as best as it can in order to mitigate the depth and length of the recession. (ET)