YOUR QUESTIONS ANSWERED
There’s no doubt that the current health crisis we are globally facing has thrown many aspects of our lives into turmoil. As we continue to navigate through the unprecedented challenges as we navigate our way towards “COVID normal”, we wanted to let you know that we are here to support our customers through these uncertain times.
We have received many questions relating to the impacts of COVID-19 on the property market and your plans to sell your property privately. While it’s impossible to foresee the exact impacts that COVID-19 will continue to have on the property market, we thought we’d take the opportunity to share some thoughts with you.
Is now a good time to sell?
Crisis or no crisis, this is always the question that people have! There are many reports on what COVID-19 will do to property prices – some positive and others, not so. While it is impossible to predict how property prices will respond in the next few months, here is what we do know:
Borrowing is cheaper than ever before
- The recent Reserve Bank of Australia (RBA) announcement has cut the cash rate to an unprecedented low of 0.10%. This means that the cost of borrowing is lower than it has ever been, making it easier for people to borrow to purchase property than ever before.
- In making this cut, the RBA made it clear that the cash rate will remain at this level until labour markets grow and the inflation rate is tracking within a range of 2-3%.
- Inflation has not been within this range for the last 3-4 years; and so most predictions are for the cash rate to remain low for some time.
When interest rates decline, property prices usually rise
- Research from the RBA points to an inverse relationship between the cash rate and property prices. This means that when interest rates fall, property prices tend to rise. This was a significant factor in the rapid value upswing in residential property from June 2019.
- However, the current situation of extreme uncertainty is driving reduced consumer confidence, so it is difficult to predict what will happen to the property market in the short term. While some are choosing to defer the decision of buying or selling a property, interest rate declines do present an opportunity for buyers to either enter the market or potentially buy at higher prices than they may have considered before.
Government stimulus is focused on keeping the economy going
- The Government continues to introduce stimulus packages to individuals and business to keep the economy going.
- While stimulus has not yet been directed specifically towards the property market, the assistance available is focused on keeping businesses going and employment up – which should have a positive impact on the property market.
- The major banks have announced mortgage holidays with support extending beyond the initial 6-month period for those whose employment has been impacted by COVID-19. This action could support buyers and provide them with confidence if they are ready to either enter the market or borrow more to upgrade from their current property.
- The actions of the RBA, governments and are certainly focused on keeping the economy as buoyant as possible during this unprecedented time of uncertainty.
Australian residential property has historically fared well against negative economic shocks
- There has been a lot of media around the negative performance of the share market recently. It is important to note that housing is an illiquid asset – meaning that it is less impacted by market volatility than liquid assets, such as shares.
- Australian residential property has historically fared well against negative economic shocks. For example:
- During the 1987 ‘Black Monday’ stock market crash, the Australian share market lost approximately 23% of its value in a single day – however housing values were largely unaffected.
- During the recession of the early 1990s, the property market declined by 4.4%; far less than the share market.
- During the GFC, the national dwelling market declined 7.5%. However, the start of a rate cutting cycle and government stimulus saw a swift recovery.
- Major share market losses and recession are not necessarily predictors of declines in housing values.
Are there buyers in the market?
We’ve heard some interesting insights on buyer search trends:
- The average time that we are spending online is increasing by up to 40%. As we practice self-isolation and our social interactions are limited, we are turning to online behaviours even more than usual.
- The major property portals have reported higher search volumes when compared to other (and arguably, much less significant) times of uncertainty, such as the 2019 Federal Election or the announcements of the Royal Commission on the banking sector.
- Australians are obsessed with property! We expect that as more people have more free time on their hands, that they will turn their minds to making decisions and conducting research that they have been deferring – including property, real estate and their next move.
There is likely to be less supply and demand for properties in the market, however, this could provide opportunity for willing buyers and sellers.
The level of uncertainty in the market is driving a lower customer sentiment, meaning some will decide to defer big economic decisions such as buying or selling a property. But uncertainty can provide opportunity. For buyers who have the confidence and financial well-being to remain active in the housing market through this period of weakness, there could potentially be some good buying opportunities to secure properties like yours, at low interest rates.
Need more information or have a question that we haven’t addressed here? No problem! To speak with one of our Private Property Specialists, send us an email at firstname.lastname@example.org or call us on 1300 289 697.