How Will Coronavirus Affect The Property Market?
After a flat 2019, all the signs were pointing towards a market recovery in 2020.
With auction clearance rates up, median prices rebounding and buyer turnout the highest in years, it was all looking so good for real estate in 2020. But how will the Coronavirus affect the market going forward and what do buyers and sellers need to know?
Unfortunately, there is little doubt that the virus outbreak (which has now officially been declared a pandemic by the WHO), will have ramifications for both the Australian economy and the world economy as a whole. At this point, it is still unclear as to when we are going to see the virus peak, and until such time, the full economic effects on our economy and financial markets will not truly be known. It has been noted by several commentators that the Australian economy is in danger of sliding into recession and while it is true that the virus’ impact could be the catalyst for this to become official, the outlook for the property market may not be as bad as you think. Here’s why.
SIGNS OF A RECOVERY HAVE BEEN EVIDENT FOR SEVERAL MONTHS
Since the start of 2020, the market has been showing signs that a recovery is imminent. After a dire 2019, consumer confidence in real estate has improved and all the data has been pointing towards a market that, while not likely to enter a major growth phase any time soon, was certainly performing stronger than it had in years. Clearance rates in the major cities were hovering around 80%; In Brisbane, median prices are on the rise and according to Domain, were forecast to increase by up to 17% over the course of 2020-21. While there’s no doubt the flow-on effect of the Coronavirus outbreak will slow things down somewhat, the effects may only be temporary. A lot will depend on how long it takes for the virus to peak but there’s every chance the market will continue its positive trajectory once the issue dies down.
INTEREST RATES ARE STILL RIDICULOUSLY LOW
The economy as a whole might seem to be in questionable health, but real estate is currently benefiting from record low interest rates with the cash rate being slashed to a gob-smacking 0.5% at the RBA’s board meeting in early March. While it is true that the RBA likely made this decision as a direct response to the Coronavirus issue, it is worth noting that all four of the major banks passed on this cut in full to their customers – Meaning Australian home buyers still have access to some of the cheapest finance ever available.
THE MARKET = SUPPLY + DEMAND
Whilst it is likely that new listing inventory will decrease in the wake of the crisis, as owners hold off from selling for fear there will be no potential buyers, it’s worth noting that often this could actually represent a good opportunity to reach the market without much competition. Typically, your chances of obtaining a higher sale price are better when there is less competing housing stock available, and while the virus’ impact will no doubt mean there will likely be less buyers, it does not mean no buyers. As of right now, today, there are still buyers in the market and for those looking to keep themselves and their families isolated, with modern technology much of the buying and selling process can be performed remotely and/or electronically, meaning you can buy or sell property with a minimum level of personal contact.
THE MEDIA IS SENSATIONALISING THIS ISSUE – WE ALL NEED TO REMAIN CALM
No-one will deny this is a serious issue, but as per usual the news media is sensationalising it and compounding the problem. The images of panicked people fighting over toilet paper and empty shelves of hand sanitizer have been splashed all over every website and every news program, but in today’s social media-centric environment the problem has escalated very quickly into unnecessary hysteria. We can all contribute to minimising the damage here by remaining calm, following hygiene protocols and restraining ourselves from panic buying and other hysterical behavior. Such things will only escalate the problem and make the fallout worse – Instead we all need to pull together to come up with real world solutions so that our society continues to function as normally as possible. This will mitigate the ongoing impact of the crisis and give our financial markets the best chance of recovering.
FOR US, IT’S BUSINESS AS USUAL
The show must go on! At House, we are still soldiering on despite the drama so contact us any time for advice on anything real estate related. If you want to talk to an industry professional about how Coronavirus might impact the value of your property, please contact us today by emailing to [email protected]