How will the coronavirus affect the Australian property market?
Since the World Health Organisation (WHO) announcement on March 12th 2020 that the COVID-19 outbreak has escalated to pandemic status, the way we are living here in Australia is changing daily. The introduction of necessary health measures and public awareness campaigns to reduce and slow the spread of this virus is here to stay until this health crisis is over. There is no doubt we are living in largely unprecedented times but in the meantime, life goes on and we have had many ask us the curly question “How will this affect the property market?”
Firstly, and obviously, I think it’s important to point out that none of us really can forecast what’s going to happen and even here in Sydney, which is traditionally one of the nation’s strongest and most robust real estate markets. Up until two weeks ago we were seeing auction clearance rates of 80%+ coupled with huge numbers at open homes and increasing demand vs limited supply in the majority of the suburbs we operate in across Sydney. The easing of credit and increased consumer sentiment had seen a strong start to the 2020 year, off the back of a robust growth environment in the latter part of 2019.
And, in a matter of days, changes have occurred that restrict public movement, trade activity and gatherings. Herd-mentality panicked consumers are suddenly scrambling (unjustifiably) for essential goods, government is banning (more justifiably) interior public gatherings of 100+, we’re all washing our hands more, practising social distancing and working from home where possible. Changes are afoot and this will continue until this virus has slowed and the impact has lessened and/or a vaccine has been found.
So, what about all those sellers and buyers who are in the market, or thinking of getting in? We may not know or be able to predict what’s likely to happen overall but we DO know the following is worth considering:
Remember your goal and stay the course
If you’re already in the market (buying or selling) and you can securely transact, then stay the course. Property buying is a long term game, and it’s important to keep in mind that, unlike shares, real estate ie: houses, units, townhouses, villas and apartments all provide that essential basic human need in the form of shelter. Property has a genuine purpose, hence one of the reasons for its lack of volatility when compared to other asset classes. We all need somewhere to live, regardless of whether that’s for ourselves or others, and this is not changing anytime soon. Banks will continue to generously lend for it, as they historically consider it a safe asset and with the cash rate now officially dropped to an all time low of just 0.25% interest rates are certainly providing relief here.
Opportunity for price falls
Now I could be wrong here, as some nervous vendors may not list their property due to uncertainty, (which could lead to insufficient stock for buyers) but if enough buyers also join them, then there could be value opportunities for those buyers who stick around and enjoy the benefits of heavily reduced competition. This doesn’t necessarily mean that all vendors may need to meet the new market conditions, but there are always vendors that have to sell, no matter the environment. Particularly those that have already bought, or are worried about further downturns in growth (which could be a possibility) such sellers may take the “bird in the hand” approach, rather than risking having to re-launch in what could be a slower growth market later on. Those cashed up buyers may well be the beneficiaries of a slower market simply because they’re in it, chequebook and pre-approval ready in hand.
There has been chatter in my own colleague circles that, contrary to the above, a short term fuel in prices could actually be on the cards, if buyers stay the course but vendors decide to hold back from listing! It’s worth remembering, that regardless of the situation, people still need somewhere to live and so, for those in the market, buying a good value property may be a priority (and this includes vendors who have already sold or committed elsewhere).
Of course, much will depend on the entire supply vs demand situation here, however if you’re not actively “in the market” and ready to transact, you definitely won’t have access to opportunity. This means having finances ready to go, actively searching, inspecting, reviewing and researching diligently in any market.
Momentum will slow but that’s to be expected
Naturally, we are cautious about what’s happening. Those businesses and industries being largely affected will be impacted by job losses and insecurity. People will cease or decrease transacting in many sectors of our markets, simply because they can’t afford to or select not to, due to uncertainty. Momentum will slow, and that’s to be expected. We’ve had slowdowns before and they’re followed by recoveries. The economy will recover and eventually we will reflect back on this period as a short term event in our history. The RBA has pointed to a comeback in the latter half of 2020 and is confident the market will “rebound quickly” once the virus is contained.
Australian residential real estate has proved to be incredibly resilient over the long term. It grows, it falls, it plateaus. It’s a long game. Unlike the sharemarket, it’s not as liquid an asset and significantly more time and thought is required to acquire and dispose of it. Hence the saying “as safe as houses”. It provides a basic human need, that isn’t going to change anytime soon. If you are in the market to sell, or buy, then you work with the market that is currently in place. That’s all you can do. Ultimately the decision to transact is up to those in the market who are willing buyers and willing sellers. What is not needed, however, is panic or complete withdrawal. Remain calm, rational and continue on with (perhaps modified) plans.
Outsource to us
As buyers agents out in the field, physically inspecting and bidding, we are well used to “wearing out the shoe leather” on behalf of our buyer clients. Of course we’ve modified our practices to ensure that, like all businesses, we are taking precautions, retaining social distances, modifying communication methods and following the necessary protocols to minimise contact in reducing the spread of this virus. The real estate industry has also instigated sound measures that serve to do the same in protecting members of the public, as well as their vendors, landlords and tenants. Private inspections will become more common and auction procedures will change (to be either in-house in agency rooms or smaller gatherings/online) all to protect us here. We’ve never seen so many bottles of hand sanitiser, gloves, masks and sterile wipes at open houses before!
So, if you want to be in the market as a buyer but prefer to outsource the task and stay home instead, remember we’re here and willing to help. In the meantime, take care, stay well and keep washing those hands!