The pandemic status of the novel coronavirus known as COVID-19 has hit business hard all around the world. And the property market is no more immune to its impacts than any other industry: No one is spared, and property investors will feel the brunt of these impacts for some time yet. But all is not lost. Even in the midst of this global crisis, business can still be done. Hope lives on, and buyers can still be found.
The core problem right now is the lack of liquidity in the market, as the economic uncertainty has many buyers tightening their belts. In such a fraught environment, they’re holding on to their money, and avoiding the property market.
In Australia, perhaps the most significant factor is the stress on rental revenues, brought about by widespread job cuts and redundancies, and an implosion of business activity. Both commercial and residential leases will likely be negatively affected for the upcoming period: increasing numbers of existing tenants will struggle to keep up with their current lease agreements; and many new renters will be forced to defer taking on new leases until conditions improve.
This clearly has serious ramifications for the investment property market.
At a more structural level, government restrictions on open house inspections and on-site auctions have pushed agents to go exclusively online – which switches off important selling triggers that entice buyers to sign on the dotted line.
According to figures from IBIS ($), national auction clearance rates for the week ending 27 March have hit their lowest point in three decades – and as we’re regularly reminded, this crisis may still only be in its early stages.
AMP Capital’s Shane Oliver believes that if Australia hits 10% unemployment, the property market could slump by as much as 20%.
Caveat venditor: Properties are still selling, but…
To paraphrase a theatrical saying, the market must go on. So agents have adapted their approach, switching to online access and auctions, and they’re still offering on-site home inspections – by appointment only. The current economic conditions mean the market is highly volatile; however, agents are still reporting sales.
One positive that has arisen from stopping on-site auctions and open house inspections is there are now fewer “sticky beak” viewers clogging up the market. Those who are attending property sales and inspections are much more likely to be genuine buyers.
Despite these plusses, the reality is that now is not an optimum time for vendors. If you can afford to wait and aren’t under stress to sell, then our counsel – at least in most cases – is for patience.
The landscape is highly nuanced, shifting daily, and moving at whip-crack speed. If you are still considering selling right now, you’ll benefit by paying very close attention to movements, trends, announcements and market shifts. Resale Australia will help you manage this critical situation and identify the best opportunities for you.
There are some silver linings. For instance, consider this: the recovery may be spectacular.
Government stimulus packages are tempering the blow for many, and freeing up household purse strings a little. Keeping some sense of economic momentum going will help ease the strain and may set the stage for a quicker rebound.
And unlike other crises, this one has a definable end-point (even though we don’t yet know the timing), and Australia has become a world leader in staring down economic crises, like it did the GFC in 2008. This country is as well placed as any developed economy to bounce back, and bounce back quickly. Another silver lining, at least where real estate is concerned, is that property markets have previously led the way in major economic recovery scenarios.
While the dark clouds may seem to be looming low for vendors at the moment, there’s always an opportunity for canny sellers to navigate these troubled waters.
Your market watchdogs
Resale Australia’s combined experience in both Australian and international real estate put us in a unique position to offer you the support and expertise you need to navigate the property market – whatever the conditions. If you’re thinking about selling your Australian property and need advice on how to identify and leverage emerging opportunities, get in touch with us today.