Effects of coronavirus pandemic on our property market. What should be your next step as an investor?

Effects of coronavirus pandemic on our property market. What should be your next step as an investor?

Posted on April 15, 2020 by Mirren Property Investment

What should be your next step as an investor?

As of April 15, 2020, the coronavirus outbreak, has already infected 1,970,879 people in the world. The pandemic is becoming one of the world’s most significant threats to the global economy. From the surging decline in stock prices, bond yields, and cash rates to disruptions in various industries and businesses, the ongoing spread of the virus is creating global financial shocks that we may need to brace for. All is not doom and gloom, though, and there are several relief actions taken by the Government. Some of them like the record-low interest rates can be an opportunity for prepared, seasoned investors.

The real estate market that has always fared well amidst recession is not immune to the virus and may be in for a bumpy ride. In fact, a slowdown in the housing market activity was seen as early as March. With unemployment potentially reaching 11% by June, property prices will continue to dip—temporarily. The decline in property prices is being leveraged upon by sophisticated property investors, keeping the market afloat.

There is hope amid this pandemic. In China, after the movement restrictions were lifted, property transactions have recovered 50% of their four-year average. In other words, this lockdown will only last for a short while and markets will rebound after the crisis is over.

To quote 9 news, “Thousands of savvy buyers think now is a good time to purchase a home as record-low interest rates and declining competition at auctions provide a window of opportunity for many first-home-buyers.

Consumer data from Finder, given exclusively to 9News.com.au, shows that 42 per cent of Australians think now is surprisingly a good time to buy property, despite the challenges presented by COVID-19.”

Housing Market Activity Statistics

The Australian property market is showing uncertainty, but that uncertainty can be an opportunity for savvy investors.

CoreLogic has shared data about the daily happenings in the real estate market. In a recent survey with real estate professionals including real estate agents, agency principals, property managers, and administration — they found that 33% of the surveyed revealed that they noticed a 50% decline in buyer inquiry attributing to the rising unemployment. With consumer confidence dwindling and as the turn of events worsen, house prices are predicted to plunge. This is where some investors may be ready to strike to action and make the most of the low prices and interest rates.

Economist Shane Oliver predicted a 20 percent drop in Sydney and Melbourne house prices following the increase in unemployment this year. And the worst part, according to experts is, we don’t know how long this will last. Property markets have always fared well in recessions, for example, the last one in 1990 created only a 4% decline in house price, presenting hope. The pandemic has forced the real estate market to work differently. Several digital means are being adapted swiftly at all fronts. Remote property appraisals, private and virtual inspections and virtual auctions have taken the forefront and are enabling the market to stay active.

Even at Mirren, we have been swift to improvise our ways to operate efficiently and give our investors the direction they need during these times.

Amongst all the properties, we are finding that some premium value properties will decelerate the most this year because of the stock market crash.

The outbreak has already resulted in job losses, particularly in lower-paid sectors. Despite this, investors and households whose income remains stable can take advantage of these low rates. Seasoned investors in a good financial position and an active investment strategy are in a good position to invest.

What The Property Market Looks Like Today?
April has been a month of disruptions in the property market. Auctions are done using digital platforms, and buyers have mixed outlooks about taking action.

As of today, there are currently two types of people in the property market: the discretionary and nondiscretionary sellers and buyers. During times of uncertainty, the discretionary group often goes on strike.

Still, there are buyers and sellers left in the market. People who sold their homes just a few months ago are currently looking to buy a new property. Those who have recently bought properties will also want to sell their old homes. Young couples who want to start families, those who are getting married, or having babies will also want to buy properties during this time.

Still, there are buyers and sellers left in the market. People who sold their homes just a few months ago are currently looking to buy a new property. Those who have recently bought properties will also want to sell their old homes. Young couples who want to start families, those who are getting married, or having babies will also want to buy properties during this time.

Long Term Effects of The Outbreak in Australia’s Property Market
Here are some expert predictions on the long-term effect of the virus spread in the property market:

A decline in population growth
Australia’s current population grows to around 360,000 people per year meaning, to accommodate new households, we need to build about 180,000 new dwellings. However, since more than half of the population is dependent on immigration, growth will most likely fall because of the travel ban happening around the world. Since international travel is restricted, the property market will rely on more local travel by Australians – Interstate migration will bring some movement.

It’s also predicted that 40% of the population will resort to renting due to a lack of funds. This again presents a window of opportunity for property investors as there will be more renters in the market. Until there more affordable housing options, many people will settle to rent spaces than buy their first homes.

Record-low interest rates

The sustaining low-interest rate situation has made it easier to own a home, especially for an investor or an owner-occupier. Thanks to the affordable finance for investors, the overall expenses are at the lowest they’ve been since a very long time.

Whether you need some guidance about your investment property portfolio or are keen to make the current situation work in favour and get into the property market, we’re here for you. Contact us today for a complimentary, no-obligation strategy session.

Sources:

1. Coronavirus Update – worldometers.info
2. “Unemployment rate set to reach 11% by June. Economy to contract by 3.5% in June quarter. Sustained recovery not expected until Q4.” – westpaciq.westpac.com.au
3. The CoreLogic Datasets Capturing The Coronavirus Shift – corelogic.com.au
4. “Coronavirus pandemic could see house prices plummet by 20 percent, economist warns” – abc.net.au
5. “Coronavirus – How will it impact Australia’s property markets? Your 20 most common questions answered.” — properetyupdate.com.au
6. https://www.9news.com.au/national/coronavirus-pandemic-property-buyers-hunt-for-bargains-as-sellers-withdraw-homes/4c441c92-a668-42a4-b39a-c24265510e38