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Will the coronavirus cause a property market crash?

Property Balancing

The coronavirus is causing a lot of fear, could it cause a property market crash?

People are selling shares. Panic buying of toilet paper and non-perishable food has been a feature so far. Some investors are now concerned that Australia and its banks could face a rough time over the next 12 months. Will Australian property be next?

The CoreLogic monthly result for February 2020 showed another month of overall gains for the national Australian property market. Nationally, in February house prices grew by another 1.1%. Sydney house prices went up 1.7% and Melbourne house prices grew 1.2%. Most of the other cities, except Darwin, saw a gain during February 2020. 

However, there are now reports that high-end property deals are starting to fall through. Buyer agents in Sydney and Melbourne are seeing sellers take offers that are close to the asking price, rather than trying to maximise the selling price.

Buyers are not turning up to auctions when they were expected to because of fear of the coronavirus. Numbers of foreign buyers and their agents have declined. I don’t blame them!

The worry is that the coronavirus could cause a (technical) recession in Australia, which would likely lead to rising unemployment and probably falling house prices. Sydney is the city that’s facing the largest outbreak in Australia, but all Australian states may be affected.

What shares would be affected? Well a recession would affect most areas of the economy, but I’m not thinking there will be a painful recession. But falling property prices would be unfortunate for all shares related to property including Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), REA Group Limited (ASX: REA), Domain Holdings Australia Ltd (ASX: DHG), CSR Limited (ASX: CSR) and Mcgrath Ltd (ASX: MEA).

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.