COVID-19 and the Property Market

What a difference a week makes. In last week’s column I said, “should we really be putting our lives on hold in such dramatic fashion.” Well, it seems we ought to be and we have – more or less.

The Prime Minister has banned public auctions and home opens in order to minimise group gatherings. Real Estate agents have responded by continuing to offer one-on-one by appointment inspections of homes for sale and rent. They have also taken up technologies that will enable virtual and video tours of homes so that buyers and tenants can continue to make purchasing and renting decisions without physical inspection.

Virtual auctions are also taking place via (amongst others) the Openn Negotiation platform. REIWA endorsed, Real Estate Sales Online (RESO) is a paperless private treaty sales solution that’s also available. Most agents have the DocuSign platform and settlement agents now use digital conveyancing methodology via PEXA.

So, transactions can still be done but it is far from business as usual. There is little doubt that sales transactions will fall although it is not yet clear if property values will follow suit.

Tenants, understandably, that have lost employment are stressed about not being able to pay rent and whilst the immediate $550 per week Centrelink payments and $20,000 superannuation drawdown will help, it’s likely vacancy rates will rise.

Historically, when negative economic shocks occur, the effect on the housing market varies. For example, the 1987 ‘Black Monday’ stock market crash caused the Australian share market to fall 23 per cent in a single day, yet housing values were left largely unaffected. Similarly, the GFC caused a 7.5 per cent decline in national house values in a twelve-month period, whereas Perth’s market sailed on through after a brief pause and recorded double digit growth off the back of the mining boom. The point is housing markets respond differently to equity markets and one another state-by-state.

According to research house Core Logic’s Eliza Owen, vendors may view the current pandemic as a temporary economic condition. If monetary and fiscal stimulation can adequately support business and household income, then we could see sharp declines in sales volumes but not necessarily dwelling values. Eliza suggests that this is because the expectation would be for market activities to return after the pandemic passes.

In other words, buyers, tenants, sellers and buyers will get back to business once life returns to normal. This expectation should provide a cushion to market values and rents as the market resorts to a holding pattern.

Whatever the next few months bring, people still need housing and the property industry is ready, able and willing to assist.

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