COVID-19 is a pandemic that has significantly affected the Australian economy. The property market has not been spared, although the impact is significantly less to date than what many industries are currently suffering.
Saying that our property markets have been remarkably resilient so far.
But how would a significant second wave of COVID-19 affect our housing markets?
Well, if we look back, there are a few lessons we can learn to help us better understand what’s ahead.
The fact is, in spite of the coronavirus-induced economic downturn, Australian property values didn’t crash as some doomsayers predicted the would, and our economy rebounded more quickly than many expected on the back of the fact that Australia, other than Victoria, has done very well in containing the virus.
Clearly, the significant financial stimulus and support measures provided by our governments have kept the doors of many local business open and many people in their jobs. At the same time, rental relief packages have kept tenants in their homes and mortgage support has meant that there have been very few forced sales.
We’ve all heard the saying – it’s all about time in the market, not timing the market. But when there’s anticipated volatility or uncertainty, it’s natural human behaviour for buyers to become more wary.
No one really knows what’s going to happen to the economy and property values, so it’s important to analyse and anticipate the possibilities and the probabilities.
How our real estate markets would be affected by a second wave would depend on how rapidly the health issues come under control, how quickly businesses resume normal trading, how soon our economy picks up and, most importantly, how quickly consumer confidence rebounds.
Not surprisingly there’s a strong relationship between how people feel about their finances and job security and the financial decisions they make, and this, in turn, will flow through to how our economy recovers and our property markets will perform.
When we feel confident about our financial circumstances, we’re more likely to feel safe in making significant financial commitments, such as buying a new home or investing in property
Market cycles and fluctuations are entirely outside our control, so the decision on when to buy should be influenced by factors which are within our control.
Consumers are showing caution and trying to make wise decisions as their primary concern now is their job security.
Should I buy a house even during the coronavirus pandemic?
The low interest rate environment will not last for a long time, and property prices will bounce back once the economy gains momentum. The cost of borrowing with interest rates is now lower than ever. It means it may spell opportunity for potential buyers with cash as they can access loans at reduced prices.
Low interest rates mean lower home loan repayments, however, since banks are tightening their lending policies, it might be harder for you to secure a home loan.
If your job and income are stable and not in danger of being cut, then you might have a higher chance of home loan approval. It’s best to get pre-approved now as there will be a cascade of effects that the coronavirus will have on the economy and lenders.
Furthermore, you must be able to make repayments on your home loan and also the costs involved in purchasing a property.
There is a probability of some astute buying by investors
If an investor has owned a property for a considerable amount of time, it should be generating decent income. Such an investor, despite the current hardships in the economy, should not see the need to liquidate the asset. It actually may be an opportunity to use your equity and buy another property.
Reduction in the supply
Due to the pandemic, there is an increase in cancellation of auctions. This dynamic is yet to still fully play out with property prices. Though our primary focus at the current situation should be on our health, it is unwise to ignore the post-pandemic effects. Our current real estate market is a bit pale, but when the pandemic is over, we can predict an increase in demand and supply.
Real estate sales are still being made
Despite the effect of the pandemic, the real estate market is still recording transactions. Although, the recent sales have recorded selling prices that are a bit lower than the market price. The bidders of the property in specific auctions were limited so it is too early to tell.