The impact of COVID-19 on the Aussie Property Market
There is a lot of discussion at the moment on how the COVID-19 crisis will impact property markets throughout Australia. The latest BIS Oxford Economics report released on Wednesday forecasts all major property markets across Australia will be negatively impacted for the remainder of 2020 with stabilisation and rebound set to occur in 2021.
Australian residential property markets are historically more resilient than the share market and most other sectors of the economy. During difficult economic times residential property is seen as a beacon of solidarity and safety, and often interest rates are lowered and government stimulus packages are given to prop up the economy, which is what we are seeing during this crisis in an unprecedented way. The recovery will also likely be fuelled by decreasing supply of new listings and new dwellings and at some stage, a recovering economy. This will make it more attractive to property buyers and investors but, with the rising unemployment rate (tipped by some economists to exceed 10%, albeit temporarily) and many investors sitting on the sidelines with a “wait to see what happens” perspective, property transactions have begun to grind to a halt and this lack of sentiment will contribute to the falling markets in the short-term. Not to mention the practical difficulty of trying to transact on property in the weeks and months ahead.
However, it is likely that there will be some really good buying opportunities, especially in the 2nd half of 2020. Buyers will be able to negotiate lower prices than they otherwise would have been able to just weeks ago, and with property prices set to rebound after this crisis has been contained, savvy investors are staying poised and ready to strike.
Overall, the property growth forecasts for the major markets remain quite positive with Sydney and Melbourne houses leading the charge with an estimated average of 8% growth per year up to 2023 according to BIS. Although some experts do not agree with this due to Sydney and Melbourne’s higher levels of unaffordability. Instead they tip smaller markets like Canberra (with its higher government workforce) and Brisbane (with its affordability and strong infrastructure pipeline) to be in a better position to rebound.
Your borrowing capacity, in this current climate, will come under increased scrutiny and additional care should be taken when selecting which lenders you deal with. Different lenders have different risk exposures and tolerances and we could see borrowers put themselves at increased risk, borrowing above their capacity or without a buffer. Seek advice from your Mortgage broker for advice throughout your borrowing journey to avoid unnecessary stress.
On the rental side of things, landlords will be doing well to retain their tenants, at the current rental during this period, as vacancy periods are already increasing and some tenants are requesting deferral of payments, although they will likely need to provide formal evidence of income loss due to the crisis to claim rent reductions.
Of course, things are still changing day by day, and many forecasting reports have a strong disclaimer of “high uncertainty” due to the fact that the longer this crisis continues, the more of a material impact it will have on the many property markets throughout Australia.
But we must remember that everything is temporary and at the end of the day folks “we will get through this!”
If you are wanting to understand more about the property market or your potential options in purchasing in the 2nd half of 2020, we encourage you to reach out to us by emailing me at [email protected] or calling me on 0430 227 328.
