How will COVID-19 affect our property markets? It looks like they're going to be shut down.
Australians are living through one of the most significant economic and social upheavals in our history.
It’s been a week since my last PROPERTY INSIDERS chat with Dr Andrew Wilson and while we were planning to give an update on COVID-19 and our property markets, it’s hard to know where to start.
Our economy has been massively disrupted and Australians are having to quickly adjust to new ways of living and working as governments urge us to keep our distance, stay at home and stop the spread.
And there is a lot of uncertainty about the future.
We don’t know the full economic cost with the toll in job and business losses mounting hourly.
And we're not really sure what will happen to the property markets.
What we do know however is that the property industry is essential to sustaining the economy through this incredibly challenging period.
And it will be a big driver behind the recovery when it comes.
Watch as we discuss the following:
*The RBA and governments re building bridges:
RBA Governor Phillip Lowe said: "We are clearly living in extraordinary and challenging times, the coronavirus is first and foremost a very major public health issue, but it’s also become a major economic problem and it’s having deep ramifications for financial systems right around the world."
He reminded us that as our country manages this difficult situation, it’s important that we do not lose sight of the fact that we will come through this.
The RBA and Government's focus is on supporting businesses and households who will suffer major hits to their incomes.
They are building bridges to help us get to the other side.
* What about no auctions and open for inspections?
The Prime Minister announced new restrictions on social gatherings agreed by the National Cabinet meaning that open homes and home auctions were banned.
However property sales will still continue with ‘expression of interest’ or ‘for sale’, with private inspections arranged by agents. This will likely lead to a material slowdown in sales, but they will still continue unless the social distancing restrictions are extended further.
* We're going into recession
It now seems that unemployment is likely to rise to double digits in the short-term, and that’s terrible for those who are going to suffer financial hardship
Unfortunately many Australians will have difficulty paying their mortgage or their rent.
Currently the government is looking at ways of assisting tenants or landlords or both.
Last week the Reserve Bank lower interest rates to 0.25% and has commenced quantitive easing lowering the 3 year bond yield.
And we've also been told by the RBA that interest rates are going to remain low for the next three years, suggesting it will take at least that long to get unemployment to the level they were looking for - around 4.5%.
* How is our economy and our financial systems and banking systems placed to cope with this sort of the situation?
The banks have been given a $90billion lifeline to go out and lend money and stimulate the economy and at a very cheap interest rate.
It's the banks' moral obligation to help home owners and small businesses (including property investors) during these difficult times.
* What is this going to mean for our property markets?
Looking back in history it is clear that residential property has performed relatively well at times of negative economic shocks.
Not all markets will be equally impacted
It is likely that the more expensive end of the property market will be the hardest hit.
It always is when the stock market crashes.
At the other end of the market cheaper, blue collar suburbs where the local workers can't perform their jobs remotely and where there is a higher incidence of casual employment, are likely to suffer more significant price drops.
However, well located homes in established middle ring suburbs are likely to hold their values better.
Considering that we're likely to have a short sharp recession followed by a fast rebound, it's likely our property markets will pick up in the second half of 2020 underpinned by pent up and rising demand at a time of low supply.
0 Comments