With Coronavirus dominating the news headlines, we wanted to address the question – “Will the Coronavirus affect property prices?”
The short answer to that questions is yes – in the short-term property prices will go down.
In the beginning of 2020, data showed that the Australian property market had started to pick up momentum, following interest rates cuts and an easing of lending conditions. However, the outbreak of Coronavirus or COVID-19 has certainly changed that.
Rate cuts and Stimulus Packages
The Reserve Bank of Australia cut interest rates soon after news of a potential Coronavirus outbreak. Traditionally this would have a positive impact on the property market. However, the reason why the RBA decided to cut interest rates was to attempt to stabilise the economy and counter the negative impact of the Coronavirus.
And while the Federal Government’s $17.6 billion stimulus package and other business assistance measures will provide short-term support for the economy, there is only so much rate cuts and stimulus packages can do. Unfortunately, there will be a spike in unemployment around the country which will result in a short sharp shock to the economy.
What does that mean for the property market?
For the property market, the bottom line is there will be a decline in the number of buyers in the market, and we will see small to medium price falls around Australia.
However, as the share market and other sectors of the economy continue to be hit hard, investors will inevitably look towards more physical assets to invest in – such as real estate and commodities. This may help the property market.
What if I want to sell?
If you’re thinking about selling, you need to appreciate that the market will be weaker. However, as the number of active buyers in the market declines, so will the number of properties on the market, as sellers choose to defer the sale of their property. As a result, competition in the property market will drop.
On the other hand, for people with wealth tied up in the volatile share market, “bricks & mortar” becomes a viable investment alternative. This means that while consumer buyer activity will drop, investors may turn to the property market for investment opportunities that provide consistent returns.
Will there be a rebound?
While 2020 will be a hard year for the economy, it will recover and there will be a rebound in the housing market. The RBA has talked about a rebound in the second half of the year and we expect the property market will bounce back strongly towards the end of 2020 and moving into 2021.
Perhaps the best quote about a recession came from Sam Walton, the founder of Wal-Mart. When asked, “What do you think about a recession?” he responded, “I thought about it and decided not to participate.”
Keep in mind that everyone needs a roof over their head. So even when times are tough, there are always opportunities to be had when buying and selling in the property market.
