EXPLORING THE ECONOMIC EFFECTS FROM CORONAVIRUS ON THE PROPERTY MARKET
Update: 24th of March 2020, 9:32pm | The Prime Minister Scott Morrison has addressed Australians at a national press conference. He has announced further restrictions to limit the spread of Covid-19. As of midnight on the 25th of March 2020, in-person real estate auctions and open inspections will no longer be allowed to continue. Our understanding is that private inspections may still be possible. We will share more information as it comes to light.
The coronavirus, or COVID-19, has well and truly made its mark in history. With share markets crashing and businesses on shaky ground, there have been growing concerns surrounding Australia’s property market.
To put it simply, coronavirus is likely to impact the number of properties going to market. However, experts have differing perspectives on exactly how property values will be impacted.
According to Dr Shane Oliver, Chief Economist from AMP Capital, a short recession caused by the coronavirus could see unemployment levels increase to 7.5%, leading to a 5% decrease in property values.
CoreLogic’s head of residential research, Eliza Owen, has said that while coronavirus could lead to a drop in property transactions, the level of risk for the property market and the impact on prices is unclear.
While it’s uncertain what the full impact COVID-19 will have on the property market, we’ve pulled together the information you should know to help you make an informed decision.
How does the property market generally respond to economic changes?
Residential property is largely an illiquid asset, meaning it isn’t as volatile as the share market. In the past, stock market crashes haven’t been directly correlated with drops in the Australian property market.
Australia has just been through a property downturn, with around 18 months of housing prices declining, mostly in Sydney and Melbourne. This was triggered by the significant tightening of lending conditions following a royal commission that revealed widespread irresponsible lending practices. With mortgages becoming harder to get, growth slowed in the amount of credit available for property, which then resulted in lower prices.
The property market tends to respond to macroeconomic conditions (things like unemployment, national wages, inflation), however this happens at a lag. Therefore, any sharp declines are somewhat cushioned.
After the 1987 ‘Black Monday’ stock market crash, property values actually experienced growth. It wasn’t until the early 1990s where Australia experienced house prices during a recession with property values slightly dropping -4.4% from June 1989 to October 1990, according to CoreLogic.
The property market tends to respond to macroeconomic conditions at a lag. Therefore, any sharp declines are somewhat cushioned.
During the GFC, property values went down by -7.5% from February 2008 to January 2009. However, according to CoreLogic, the market turned around quickly as a result of the mining boom, rate cuts and government stimulus.
How could COVID-19 impact Australia’s property market?
With new developments happening everyday, it’s hard to predict what might happen to the property market. However, there are a few different scenarios that could play out.
Property is a consumption good, meaning that changes in employment opportunity and income growth are the primary factors that affect property values. The extent to which these are affected will depend on the length of the outbreak and the fiscal measures put in place to protect businesses.
In terms of the volume of property transactions, it’s likely that we’ll be seeing drops. With lockdown measures being put into place in Australia, property inspections and auctions will be affected. Uncertainty may lead to fewer potential buyers on the market as people decide to wait, leading potential sellers to postpone selling as well.
Currently there are a lot of people being temporarily unemployed while the country is moving into enforced social distancing and a potential lockdown. The faster the virus is contained and Australia can return to more normal operations the less chance of a sustained recession. As mentioned earlier, based on a more conservative prediction, a short recession could lead to a 5% drop in property values. But if the coronavirus were to lead Australia into a deep recession, unemployment could rise to 12%.
Uncertainty may lead to fewer potential buyers on the market as people decide to wait, leading potential sellers to postpone selling as well.
During the SARS outbreak, Hong Kong saw volumes decrease by at least 30% between 2003 and 2004. During the early stages of the coronavirus, transactions dropped nearly 100% in Wuhan, according to data from Capital Economics.
If Australia were to put in place a Wuhan or European style lockdown, volumes could drop close to zero. Though this is a more extreme prediction, it could be the case if more restrictions are made.
Recently, we’ve seen the Reserve Bank of Australia (RBA) cutting the cash rate, emergency lending for small businesses, and major banks putting mortgage repayments on hold. Ideally, these measures will prevent a recession. However, they may only soften the blow.
What are real estate agents seeing?
Across Australia, real estate agents haven’t seen a massive impact on values yet. However, the way property is transacted has already started changing and more change is expected to come.
Alex Stassen of Harcourts Property Centre in Beenleigh hasn’t seen an effect on property prices so far, “It might be a little more quiet for a while but I think in general, there’s still enough buyers, enough interest, and enough sellers that it’s going to be okay.”
“I had more people through my open home last week at an auction than I think I've ever seen in the last 10 years. This could be different this weekend. Things are changing day to day.”
“We’re bumping elbows instead of shaking hands and we’ve got hand sanitiser. I’ve been considering not doing open homes, just private inspections.”
Vendors need to realise that the market doesn’t actually stop. There will always be property on the market and buyers out there wanting to buy.
Ned Nikolic of Barry Plant in Melton remains positive but understands that things will change every week, “I’m a positive person, I hope it doesn’t affect it at all but I would be naive to think it won’t. Look, no one’s got that crystal ball, I just take it week by week and adjust accordingly, that’s all we can do.”
Melissa Abela of YPA Estate Agents in Meadow Heights has seen changes in how auctions run, “We’ve definitely had people calling up to see if they can bid over the phone instead of actually attending so we had a twilight auction last night.”
“I think vendors also need to realise that the market doesn’t actually stop. There will always be property on the market and buyers out there wanting to buy.”
“We are making sure that everything is sanitised before, after and sometimes during opens using disinfectant wipes on all door handles, windows and stuff like that. We are providing gloves not only for ourselves but for any buyers that come through to have a look at the home.”
In the Sydney property market, real estate agents are seeing activity go down. However, more serious buyers are coming to the forefront.
Dion Verzeletti of Ray White in Pennant Hills has seen some caution, “The market is still active but everyone is being cautious. Our numbers are down through our open homes but people who are serious about buying are still coming.”
“Listings are still ticking at the moment. We have quite a few properties coming to market in the coming weeks, a couple of new ones despite what is happening. Everyone is watching it day to day. Life has to go on.”
Peter Georgiou of Raine and Horne in Bardwell Park expects the coronavirus to weed out buyers who aren’t serious, “The people that are sceptical or just having a look at the market and seeing what’s going on will start to disappear a little bit. The more serious buyers that are ready financially will buy.”
Exploring the economic effects from Coronavirus on the property market
By Johanna SetonPublished March 24, 2020Last updated on March 24, 2020
Update: 24th of March 2020, 9:32pm | The Prime Minister Scott Morrison has addressed Australians at a national press conference. He has announced further restrictions to limit the spread of Covid-19. As of midnight on the 25th of March 2020, in-person real estate auctions and open inspections will no longer be allowed to continue. Our understanding is that private inspections may still be possible. We will share more information as it comes to light.
The coronavirus, or COVID-19, has well and truly made its mark in history. With share markets crashing and businesses on shaky ground, there have been growing concerns surrounding Australia’s property market.
To put it simply, coronavirus is likely to impact the number of properties going to market. However, experts have differing perspectives on exactly how property values will be impacted.
According to Dr Shane Oliver, Chief Economist from AMP Capital, a short recession caused by the coronavirus could see unemployment levels increase to 7.5%, leading to a 5% decrease in property values.
CoreLogic’s head of residential research, Eliza Owen, has said that while coronavirus could lead to a drop in property transactions, the level of risk for the property market and the impact on prices is unclear.
While it’s uncertain what the full impact COVID-19 will have on the property market, we’ve pulled together the information you should know to help you make an informed decision.
How does the property market generally respond to economic changes?
Residential property is largely an illiquid asset, meaning it isn’t as volatile as the share market. In the past, stock market crashes haven’t been directly correlated with drops in the Australian property market.
Australia has just been through a property downturn, with around 18 months of housing prices declining, mostly in Sydney and Melbourne. This was triggered by the significant tightening of lending conditions following a royal commission that revealed widespread irresponsible lending practices. With mortgages becoming harder to get, growth slowed in the amount of credit available for property, which then resulted in lower prices.
The property market tends to respond to macroeconomic conditions (things like unemployment, national wages, inflation), however this happens at a lag. Therefore, any sharp declines are somewhat cushioned.
After the 1987 ‘Black Monday’ stock market crash, property values actually experienced growth. It wasn’t until the early 1990s where Australia experienced house prices during a recession with property values slightly dropping -4.4% from June 1989 to October 1990, according to CoreLogic.
The property market tends to respond to macroeconomic conditions at a lag. Therefore, any sharp declines are somewhat cushioned.
During the GFC, property values went down by -7.5% from February 2008 to January 2009. However, according to CoreLogic, the market turned around quickly as a result of the mining boom, rate cuts and government stimulus.
How could COVID-19 impact Australia’s property market?
With new developments happening everyday, it’s hard to predict what might happen to the property market. However, there are a few different scenarios that could play out.
Property is a consumption good, meaning that changes in employment opportunity and income growth are the primary factors that affect property values. The extent to which these are affected will depend on the length of the outbreak and the fiscal measures put in place to protect businesses.
In terms of the volume of property transactions, it’s likely that we’ll be seeing drops. With lockdown measures being put into place in Australia, property inspections and auctions will be affected. Uncertainty may lead to fewer potential buyers on the market as people decide to wait, leading potential sellers to postpone selling as well.
Currently there are a lot of people being temporarily unemployed while the country is moving into enforced social distancing and a potential lockdown. The faster the virus is contained and Australia can return to more normal operations the less chance of a sustained recession. As mentioned earlier, based on a more conservative prediction, a short recession could lead to a 5% drop in property values. But if the coronavirus were to lead Australia into a deep recession, unemployment could rise to 12%.
Uncertainty may lead to fewer potential buyers on the market as people decide to wait, leading potential sellers to postpone selling as well.
During the SARS outbreak, Hong Kong saw volumes decrease by at least 30% between 2003 and 2004. During the early stages of the coronavirus, transactions dropped nearly 100% in Wuhan, according to data from Capital Economics.
If Australia were to put in place a Wuhan or European style lockdown, volumes could drop close to zero. Though this is a more extreme prediction, it could be the case if more restrictions are made.
Recently, we’ve seen the Reserve Bank of Australia (RBA) cutting the cash rate, emergency lending for small businesses, and major banks putting mortgage repayments on hold. Ideally, these measures will prevent a recession. However, they may only soften the blow.
What are real estate agents seeing?
Across Australia, real estate agents haven’t seen a massive impact on values yet. However, the way property is transacted has already started changing and more change is expected to come.
Alex Stassen of Harcourts Property Centre in Beenleigh hasn’t seen an effect on property prices so far, “It might be a little more quiet for a while but I think in general, there’s still enough buyers, enough interest, and enough sellers that it’s going to be okay.”
“I had more people through my open home last week at an auction than I think I've ever seen in the last 10 years. This could be different this weekend. Things are changing day to day.”
“We’re bumping elbows instead of shaking hands and we’ve got hand sanitiser. I’ve been considering not doing open homes, just private inspections.”
Vendors need to realise that the market doesn’t actually stop. There will always be property on the market and buyers out there wanting to buy.
Ned Nikolic of Barry Plant in Melton remains positive but understands that things will change every week, “I’m a positive person, I hope it doesn’t affect it at all but I would be naive to think it won’t. Look, no one’s got that crystal ball, I just take it week by week and adjust accordingly, that’s all we can do.”
Melissa Abela of YPA Estate Agents in Meadow Heights has seen changes in how auctions run, “We’ve definitely had people calling up to see if they can bid over the phone instead of actually attending so we had a twilight auction last night.”
“I think vendors also need to realise that the market doesn’t actually stop. There will always be property on the market and buyers out there wanting to buy.”
“We are making sure that everything is sanitised before, after and sometimes during opens using disinfectant wipes on all door handles, windows and stuff like that. We are providing gloves not only for ourselves but for any buyers that come through to have a look at the home.”
In the Sydney property market, real estate agents are seeing activity go down. However, more serious buyers are coming to the forefront.
Dion Verzeletti of Ray White in Pennant Hills has seen some caution, “The market is still active but everyone is being cautious. Our numbers are down through our open homes but people who are serious about buying are still coming.”
“Listings are still ticking at the moment. We have quite a few properties coming to market in the coming weeks, a couple of new ones despite what is happening. Everyone is watching it day to day. Life has to go on.”
Peter Georgiou of Raine and Horne in Bardwell Park expects the coronavirus to weed out buyers who aren’t serious, “The people that are sceptical or just having a look at the market and seeing what’s going on will start to disappear a little bit. The more serious buyers that are ready financially will buy.”
Thinking of selling?In this climate, the agent you choose is more important than ever.Compare agents now
Property markets will respond to COVID-19 differently
Though we can’t predict how property markets will respond to the coronavirus, we can predict that it will affect individual markets differently. Every region will have a unique reaction.
For example, in Australia’s last downturn, Sydney and Melbourne were hit the hardest. However, values in Brisbane and Adelaide were, for the most part, steady.
We can assume that areas most affected by the coronavirus will see the largest falls in property values. The more COVID-19 impacts an area, the longer it will take before everything goes back to business as usual.
Furthermore, areas with large increases in unemployment, potentially some that are reliant on tourism or hospitality, will see their property markets more negatively impacted.
How has the property market been affected in other countries?
In America, an analysis by Capital Economics predicts that compared to last quarter, home sales this season could fall by 35% annually as a result of restricted movement and a surge in unemployment. Unlike in Australia, Americans have already seen a similar macroeconomic environment lead to one of their worst housing bubbles.
As expected, Italy and South Korea, two countries with some of the highest reported cases of coronavirus, have both seen drops in property transactions. Home sales in Milan have dropped 12% year-on-year during January and February. In South Korea, there has been a 80% decline in apartment deal volume compared to December.
In the UK, the property market saw a boost in optimism at the end of last year, similar to in Australia, known as the “Boris Bounce” after Boris Johnson’s election win. Though effects on home values haven’t been seen yet, economic pressures from the coronavirus present risks for the future.
Should you be worried if you’re a seller or homeowner?
On top of cutting the cash rate, the RBA have announced that they are ready to use quantitative easing (QE). Essentially, they would buy government bonds and other financial assets, use these to print money, and then pump money into the financial system.
According to AMP Capital, QE could be good news for homeowners with mortgages. The announcement on QE along with the rate cut has already led the Commonwealth Bank of Australia to cut fixed home loan rates.
With the major banks introducing mortgage deferment, allowing people to put repayments on hold, those who previously had pressure to sell due to default concerns now have more time.
If you’re still hoping to sell your property, be mindful that listing volumes are likely to drop further, and the process of selling will need to adapt to current restrictions on social distancing. This would mean adopting methods such as private inspections, digital walkthroughs, and remote auctions.
Major banks are introducing mortgage deferment, allowing people to put repayments on hold. Those who previously had pressure to sell due to default concerns now have more time.
While agents are starting to shift behaviours to accommodate this new reality, it’s unknown whether price discovery would weaken due to a lower amount of buyers attending in-person open homes compared to the droves that we would see in normal environments. Interest rates are the lowest they’ve been in history, so buyer demand in certain areas could potentially outstrip supply; however, with the high number of people temporarily being unemployed (e.g. hospitality & retail industries) this remains highly uncertain.
It’s unknown how long the Coronavirus outbreak will last, but once it’s over, assuming measures taken by the RBA and major banks pay off, there is likely to be a rise in property transaction volumes.
Depending on how long the coronavirus outbreak lasts, it could be worthwhile to hold out on selling. Assuming that the measures taken by the RBA and major banks pay off, there could be a rise in property prices after the virus passes. However, if we’re not able to curb closure and liquidation of small businesses, and if Australia were to fall into a more permanent recession, the property landscape could worsen for property owners.
If you are unsure, the best person to speak to in your area is your local real estate agent, they will be able to tell you if there is demand for your property or if it’s better to hold for now. If you are in a situation where you must sell for some reason, a real estate agent’s job is to try and find you any demand that is out there.
Is there a silver lining?
A point to remember is that buying and selling in the same market isn’t a problem. Though you may sell your home for less, you’ll also be buying your new home for less.
In fact, a declining market might actually be ideal for those looking to upsize or upgrade. Theoretically, the amount that you save on buying a new home will be more than the amount you missed out on for selling while prices are down.
Looking at the positives, if people are looking to upgrade, now is the perfect time.
Ned Nikolic of Barry Plant in Melton explained, “As long as you buy and sell in the same market there shouldn’t be any difference whatsoever. If anything the gap might be a little easier for people that are upgrading to sell now and buy. Looking at the positives, if people are looking to upgrade, now is the perfect time.”
In the best case scenario, if unemployment levels do not rise significantly after coronavirus has been eradicated, and if the government can prevent small to medium businesses from going into liquidation, then all the stimulus measures the government has put in place could result in an increase in residential house prices.
Exploring the economic effects from Coronavirus on the property market
By Johanna SetonPublished March 24, 2020Last updated on March 24, 2020
Update: 24th of March 2020, 9:32pm | The Prime Minister Scott Morrison has addressed Australians at a national press conference. He has announced further restrictions to limit the spread of Covid-19. As of midnight on the 25th of March 2020, in-person real estate auctions and open inspections will no longer be allowed to continue. Our understanding is that private inspections may still be possible. We will share more information as it comes to light.
The coronavirus, or COVID-19, has well and truly made its mark in history. With share markets crashing and businesses on shaky ground, there have been growing concerns surrounding Australia’s property market.
To put it simply, coronavirus is likely to impact the number of properties going to market. However, experts have differing perspectives on exactly how property values will be impacted.
According to Dr Shane Oliver, Chief Economist from AMP Capital, a short recession caused by the coronavirus could see unemployment levels increase to 7.5%, leading to a 5% decrease in property values.
CoreLogic’s head of residential research, Eliza Owen, has said that while coronavirus could lead to a drop in property transactions, the level of risk for the property market and the impact on prices is unclear.
While it’s uncertain what the full impact COVID-19 will have on the property market, we’ve pulled together the information you should know to help you make an informed decision.
How does the property market generally respond to economic changes?
Residential property is largely an illiquid asset, meaning it isn’t as volatile as the share market. In the past, stock market crashes haven’t been directly correlated with drops in the Australian property market.
Australia has just been through a property downturn, with around 18 months of housing prices declining, mostly in Sydney and Melbourne. This was triggered by the significant tightening of lending conditions following a royal commission that revealed widespread irresponsible lending practices. With mortgages becoming harder to get, growth slowed in the amount of credit available for property, which then resulted in lower prices.
The property market tends to respond to macroeconomic conditions (things like unemployment, national wages, inflation), however this happens at a lag. Therefore, any sharp declines are somewhat cushioned.
After the 1987 ‘Black Monday’ stock market crash, property values actually experienced growth. It wasn’t until the early 1990s where Australia experienced house prices during a recession with property values slightly dropping -4.4% from June 1989 to October 1990, according to CoreLogic.
The property market tends to respond to macroeconomic conditions at a lag. Therefore, any sharp declines are somewhat cushioned.
During the GFC, property values went down by -7.5% from February 2008 to January 2009. However, according to CoreLogic, the market turned around quickly as a result of the mining boom, rate cuts and government stimulus.
How could COVID-19 impact Australia’s property market?
With new developments happening everyday, it’s hard to predict what might happen to the property market. However, there are a few different scenarios that could play out.
Property is a consumption good, meaning that changes in employment opportunity and income growth are the primary factors that affect property values. The extent to which these are affected will depend on the length of the outbreak and the fiscal measures put in place to protect businesses.
In terms of the volume of property transactions, it’s likely that we’ll be seeing drops. With lockdown measures being put into place in Australia, property inspections and auctions will be affected. Uncertainty may lead to fewer potential buyers on the market as people decide to wait, leading potential sellers to postpone selling as well.
Currently there are a lot of people being temporarily unemployed while the country is moving into enforced social distancing and a potential lockdown. The faster the virus is contained and Australia can return to more normal operations the less chance of a sustained recession. As mentioned earlier, based on a more conservative prediction, a short recession could lead to a 5% drop in property values. But if the coronavirus were to lead Australia into a deep recession, unemployment could rise to 12%.
Uncertainty may lead to fewer potential buyers on the market as people decide to wait, leading potential sellers to postpone selling as well.
During the SARS outbreak, Hong Kong saw volumes decrease by at least 30% between 2003 and 2004. During the early stages of the coronavirus, transactions dropped nearly 100% in Wuhan, according to data from Capital Economics.
If Australia were to put in place a Wuhan or European style lockdown, volumes could drop close to zero. Though this is a more extreme prediction, it could be the case if more restrictions are made.
Recently, we’ve seen the Reserve Bank of Australia (RBA) cutting the cash rate, emergency lending for small businesses, and major banks putting mortgage repayments on hold. Ideally, these measures will prevent a recession. However, they may only soften the blow.
What are real estate agents seeing?
Across Australia, real estate agents haven’t seen a massive impact on values yet. However, the way property is transacted has already started changing and more change is expected to come.
Alex Stassen of Harcourts Property Centre in Beenleigh hasn’t seen an effect on property prices so far, “It might be a little more quiet for a while but I think in general, there’s still enough buyers, enough interest, and enough sellers that it’s going to be okay.”
“I had more people through my open home last week at an auction than I think I've ever seen in the last 10 years. This could be different this weekend. Things are changing day to day.”
“We’re bumping elbows instead of shaking hands and we’ve got hand sanitiser. I’ve been considering not doing open homes, just private inspections.”
Vendors need to realise that the market doesn’t actually stop. There will always be property on the market and buyers out there wanting to buy.
Ned Nikolic of Barry Plant in Melton remains positive but understands that things will change every week, “I’m a positive person, I hope it doesn’t affect it at all but I would be naive to think it won’t. Look, no one’s got that crystal ball, I just take it week by week and adjust accordingly, that’s all we can do.”
Melissa Abela of YPA Estate Agents in Meadow Heights has seen changes in how auctions run, “We’ve definitely had people calling up to see if they can bid over the phone instead of actually attending so we had a twilight auction last night.”
“I think vendors also need to realise that the market doesn’t actually stop. There will always be property on the market and buyers out there wanting to buy.”
“We are making sure that everything is sanitised before, after and sometimes during opens using disinfectant wipes on all door handles, windows and stuff like that. We are providing gloves not only for ourselves but for any buyers that come through to have a look at the home.”
In the Sydney property market, real estate agents are seeing activity go down. However, more serious buyers are coming to the forefront.
Dion Verzeletti of Ray White in Pennant Hills has seen some caution, “The market is still active but everyone is being cautious. Our numbers are down through our open homes but people who are serious about buying are still coming.”
“Listings are still ticking at the moment. We have quite a few properties coming to market in the coming weeks, a couple of new ones despite what is happening. Everyone is watching it day to day. Life has to go on.”
Peter Georgiou of Raine and Horne in Bardwell Park expects the coronavirus to weed out buyers who aren’t serious, “The people that are sceptical or just having a look at the market and seeing what’s going on will start to disappear a little bit. The more serious buyers that are ready financially will buy.”
Thinking of selling?In this climate, the agent you choose is more important than ever.Compare agents now
Property markets will respond to COVID-19 differently
Though we can’t predict how property markets will respond to the coronavirus, we can predict that it will affect individual markets differently. Every region will have a unique reaction.
For example, in Australia’s last downturn, Sydney and Melbourne were hit the hardest. However, values in Brisbane and Adelaide were, for the most part, steady.
We can assume that areas most affected by the coronavirus will see the largest falls in property values. The more COVID-19 impacts an area, the longer it will take before everything goes back to business as usual.
Furthermore, areas with large increases in unemployment, potentially some that are reliant on tourism or hospitality, will see their property markets more negatively impacted.
How has the property market been affected in other countries?
In America, an analysis by Capital Economics predicts that compared to last quarter, home sales this season could fall by 35% annually as a result of restricted movement and a surge in unemployment. Unlike in Australia, Americans have already seen a similar macroeconomic environment lead to one of their worst housing bubbles.
As expected, Italy and South Korea, two countries with some of the highest reported cases of coronavirus, have both seen drops in property transactions. Home sales in Milan have dropped 12% year-on-year during January and February. In South Korea, there has been a 80% decline in apartment deal volume compared to December.
In the UK, the property market saw a boost in optimism at the end of last year, similar to in Australia, known as the “Boris Bounce” after Boris Johnson’s election win. Though effects on home values haven’t been seen yet, economic pressures from the coronavirus present risks for the future.
Should you be worried if you’re a seller or homeowner?
On top of cutting the cash rate, the RBA have announced that they are ready to use quantitative easing (QE). Essentially, they would buy government bonds and other financial assets, use these to print money, and then pump money into the financial system.
According to AMP Capital, QE could be good news for homeowners with mortgages. The announcement on QE along with the rate cut has already led the Commonwealth Bank of Australia to cut fixed home loan rates.
With the major banks introducing mortgage deferment, allowing people to put repayments on hold, those who previously had pressure to sell due to default concerns now have more time.
If you’re still hoping to sell your property, be mindful that listing volumes are likely to drop further, and the process of selling will need to adapt to current restrictions on social distancing. This would mean adopting methods such as private inspections, digital walkthroughs, and remote auctions.
Major banks are introducing mortgage deferment, allowing people to put repayments on hold. Those who previously had pressure to sell due to default concerns now have more time.
While agents are starting to shift behaviours to accommodate this new reality, it’s unknown whether price discovery would weaken due to a lower amount of buyers attending in-person open homes compared to the droves that we would see in normal environments. Interest rates are the lowest they’ve been in history, so buyer demand in certain areas could potentially outstrip supply; however, with the high number of people temporarily being unemployed (e.g. hospitality & retail industries) this remains highly uncertain.
It’s unknown how long the Coronavirus outbreak will last, but once it’s over, assuming measures taken by the RBA and major banks pay off, there is likely to be a rise in property transaction volumes.
Depending on how long the coronavirus outbreak lasts, it could be worthwhile to hold out on selling. Assuming that the measures taken by the RBA and major banks pay off, there could be a rise in property prices after the virus passes. However, if we’re not able to curb closure and liquidation of small businesses, and if Australia were to fall into a more permanent recession, the property landscape could worsen for property owners.
If you are unsure, the best person to speak to in your area is your local real estate agent, they will be able to tell you if there is demand for your property or if it’s better to hold for now. If you are in a situation where you must sell for some reason, a real estate agent’s job is to try and find you any demand that is out there.
Is there a silver lining?
A point to remember is that buying and selling in the same market isn’t a problem. Though you may sell your home for less, you’ll also be buying your new home for less.
In fact, a declining market might actually be ideal for those looking to upsize or upgrade. Theoretically, the amount that you save on buying a new home will be more than the amount you missed out on for selling while prices are down.
Looking at the positives, if people are looking to upgrade, now is the perfect time.
Ned Nikolic of Barry Plant in Melton explained, “As long as you buy and sell in the same market there shouldn’t be any difference whatsoever. If anything the gap might be a little easier for people that are upgrading to sell now and buy. Looking at the positives, if people are looking to upgrade, now is the perfect time.”
In the best case scenario, if unemployment levels do not rise significantly after coronavirus has been eradicated, and if the government can prevent small to medium businesses from going into liquidation, then all the stimulus measures the government has put in place could result in an increase in residential house prices.
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If you are selling what are your options?
Selling your property at the best of times can be a challenge, so selling a property during times like these presents its own set of issues - especially with social distancing measures and rules regarding shut downs changing by the day.
However, if you’re looking to sell, the good news is that agents are quickly adapting their behaviours to service sellers and buyers in new ways. They’re doing this through methods like detailed virtual walkthroughs, one-on-one private open homes, social distancing at auctions and even conducting auctions remotely through online or phone bidding. Conveyancers are increasingly moving to conduct business over the phone if vendors don’t want to meet with them, and some agencies are utilising tech to enable digital contracts and deposits.
For sellers who feel uncomfortable with any upfront costs, some agents are also deferring fees. Melbourne agent Melissa Abela says, “We don’t ask for upfront costs, so they [vendors] don’t have to worry if they are a little financially stuck with paying for advertising or conveyancing fees. If the property sells, it comes out of the settlement.”
The biggest change to marketing a property in this climate is the lack of foot traffic through open homes, but anyone looking to buy would certainly still be scrolling through listings on sites such as Domain and Realestate.com.au and anyone with a need to buy is still going to. With that being said, due to less ‘in-person’ buyer demand, consider choosing an agent who has a large buyer database that they actively keep warm; that means asking any agent you’re considering hiring how big their database is and whether they have buyers looking for properties like yours.
We know the prospect of selling during an unprecedented time is overwhelming, so if you’re unsure of whether you should go to market, or if you have no choice but to sell, we can give you a hand finding the right agent who can handle the selling process confidently. We’re here to help.
Source | By Johanna SetonPublished March 24, 2020 -
