April 1, 2020 | Coronavirus: What to expect from the property market amid COVID-19
As Australia experiences a steep rise in confirmed cases of COVID-19, concerns over the pandemic’s impact on the property market are increasing.
Over the past month, both State and Federal Governments have introduced new measures to address the ongoing threat posed by the Coronavirus (COVID-19) outbreak.
In an effort to curb the spread of the virus, social distancing measures have significantly altered business practices across all sectors of the economy. Among the Government led directives, are bans on open real estate auctions and open home inspections. These have now been replaced by online auctions and private property inspections.
Social distancing will also likely delay property transactions as policies may intensify. It is hard to forecast the exact impact this is going to have, but it will certainly adjust how the real estate industry operates. Although it is difficult to be definitive in these rapidly changing conditions, we currently foresee a downturn in the property sector to be relatively short lived.
For the second time in March 2020, the Reserve bank of Australia cut the official cash rate to a new record low of 0.25 per cent in an emergency move to support the economy facing challenges due to the Coronavirus. Government and RBA measures to help struggling businesses and households through the Coronavirus shutdown should help in preventing a really big rise in unemployment. Some economists have stipulated that if there was a rise in unemployment to around 7.5%, it would likely drive a 5% dip in property prices. However, once COVID-19 is under control, a market recovery is anticipated as the Australian economy bounces back and consumer confidence rises.
What do I need to know if I’m looking to buy a home?
For those that have the capacity to buy in the current market, money is cheap and there could be some great opportunities over the next few months. In this environment, buyers who have very secure jobs are actually in an improved position because the overall market is weaker. There will be buyers who are simply unable to buy now due to reduced incomes and job uncertainty. Then there are others who are adopting the wait-and-see approach.
What do I need to know if I’m a property investor?
Property is deemed a safer investment option compared with the share market and those who take a long-term perspective will always outsmart short term reactive thinkers. It has never been cheaper for investors to obtain finance and if prices come down, rental yields will increase, and investors will be in a far greater position to capitalise. A major point to factor is that it could take longer to find a tenant, or a rent reduction may be required during these unprecedented times.
What is ahead
Unfortunately, no one has the crystal ball to accurately predict the future. We can’t be sure how the Coronavirus health crisis will pan out globally. We also can’t be exactly sure how it will affect the Australian economy or our property market until we see an end to this crisis. There will be some business casualties along the way, but eventually, things will improve and we will get through this.
Once COVID-19 is under control, the housing market is likely to bounce back with a combination of record-low mortgage rates and the likelihood that they will remain at these levels for quite some time. In addition to this, a slowdown in property transactions in the coming months combined with continuing population growth will likely create pent-up demand for housing. This pressure on supply and demand will once again drive high property prices.
The team at Beckett are continuously monitoring the latest developments so that we are best informed to help our clients make the best decisions to ensure both personal and financial health. We are still trading and assisting our clients under the Government’s new health guidelines and we welcome any future enquiries.