While the COVID-19 outbreak has already affected activity in the property market, it might not necessarily make housing affordable for potential buyers, said Nerida Conisbee, chief economist of the REA Group.
Conisbee said some markets will be hit by the impacts of the outbreak on market activity, but not all will be affected in the same way.
“There are always some businesses and individuals that do well out of a downturn, and the same can be said for property. While it is still very uncertain how much prices will fall, rising unemployment and problems in the rental market suggest that eventually they will,” Conisbee said in a think piece in Property Observer.
While a decline in home values will trigger an improvement in affordability, Conisbee said it will only be felt by homebuyers who still have healthy finances.
“Without a secure job, banks may be less inclined to lend. We’re yet to see the impact of COVID-19 on house prices, and while we can safely assume that they won’t rise in the next few months, they won’t necessarily fall by a meaningful amount either,” she said.
A recent study by CoreLogic found that the coronavirus outbreak has yet to pull property values down into negative territory. In fact, over the 28 days ending on 21 April, prices are still 0.4% higher than a year ago.
“Whenever there is a global financial shock, some commentators predict huge property price falls, which ultimately don’t happen. There may be a slight downturn in prices over the short term, but real estate is a long-term investment that has historically shown resilience time and time again,” he said.
The low interest-rate environment will be crucial in helping cushion the negative impact of the coronavirus outbreak on house prices, according to the Property Investment Professionals of Australia (PIPA).
Peter Koulizos, chairperson of PIPA, said the recent rate cuts by the Reserve Bank of Australia are amongst the many financial supports available that would help prevent any significant price declines in the medium term.
“Property owners are well-placed to ride out any temporary downturn,” he said.
Koulizos said the banks’ offer to defer mortgage payments would also be a crucial support for property investors who are faced with financial difficulties amid the COVID-19 outbreak.
Still, Koulizos believes property prices might temporarily decline by as much as 10%, but they are poised to rebound quickly.
“Whenever there is a global financial shock, some commentators predict huge property price falls, which ultimately don’t happen. There may be a slight downturn in prices over the short term, but real estate is a long-term investment that has historically shown resilience time and time again,” he said.
The low interest-rate environment will be crucial in helping cushion the negative impact of the coronavirus outbreak on house prices, according to the Property Investment Professionals of Australia (PIPA).
Peter Koulizos, chairperson of PIPA, said the recent rate cuts by the Reserve Bank of Australia are amongst the many financial supports available that would help prevent any significant price declines in the medium term.
“Property owners are well-placed to ride out any temporary downturn,” he said.
Koulizos said the banks’ offer to defer mortgage payments would also be a crucial support for property investors who are faced with financial difficulties amid the COVID-19 outbreak.
Still, Koulizos believes property prices might temporarily decline by as much as 10%, but they are poised to rebound quickly.
“Whenever there is a global financial shock, some commentators predict huge property price falls, which ultimately don’t happen. There may be a slight downturn in prices over the short term, but real estate is a long-term investment that has historically shown resilience time and time again,” he said.
However, rental markets are expected to bear the brunt of the situation, as many short-term listings are added to the supply of houses. As a result, rents will likely trend lower.
“Rental markets were in good shape prior to the pandemic, but there has been a significant number of holiday-related listings come on to the market over recent weeks, which is likely to continue for some time yet,” Koulizos said.
Despite the projected decline in rent, property investors are in a good position to manage their rental income, especially with the lower mortgage costs.
“It is far better for this to happen now with most sales and rental markets in healthy shape before the crisis began,” he said.
Over the 28 days ending on 21 April, prices are still 0.4% higher than a year ago. This growth, however, already reflects a moderation from the 1.1% gain in March.
However, rental markets are expected to bear the brunt of the situation, as many short-term listings are added to the supply of houses. As a result, rents will likely trend lower.
“Rental markets were in good shape prior to the pandemic, but there has been a significant number of holiday-related listings come on to the market over recent weeks, which is likely to continue for some time yet,” Koulizos said.
Despite the projected decline in rent, property investors are in a good position to manage their rental income, especially with the lower mortgage costs.
“It is far better for this to happen now with most sales and rental markets in healthy shape before the crisis began,” he said.
Over the 28 days ending on 21 April, prices are still 0.4% higher than a year ago. This growth, however, already reflects a moderation from the 1.1% gain in March.
Property experts are suggesting that the Central Coast housing market may benefit from some trends that are likely to emerge post COVID-19.
With workers realising the viability of working from home and retirees keen to escape populated areas, the coastal region north of Sydney might be the perfect escape for potential buyers.
“The Central Coast market was trending upwards late in 2019 and early in 2020, before the onset of the virus shutdown period, and is set to be a strong market longer-term,” HotSpotting’s Terry Ryder said.
“This trend will be further exacerbated by the current situation, which is forcing people to work from home. Some will make it a permanent arrangement.”
With property significantly cheaper and a location just an hour and a half north of Sydney, Central Coast Buyers Agent Matt Sharp said that it would be a no-brainer for Sydney buyers to make the move north.
“This was already happening, but I can see it gaining momentum,” he said.
“With the enhancement of technology, companies will start to see that it’s a legitimate option.
Even commuting part-time to Sydney would work for a lot of people.
“I struggle to comprehend how young families can buy in Sydney…you’re talking $2 million plus just to live near the beach.”
Realestate.com’s Chief Economist Nerida Conisbee recently told the Daily Telegraph that regional search activity has continued to grow since COVID-19 restrictions, as Australian’s began to reassess their housing situations.
And it is not only Sydney workers that might start looking further afield.
National online retirement property site Downsizing has revealed that of the top ten most searched suburbs for retirement villages since COVID-19, the Central Coast is incredibly popular, with Chain Valley Bay and Kincumber two of the most searched suburbs in NSW.
Both suburbs offer over 50s retirement communities, with mobile homes on the market for as little as $249,000.
Sydney did not even make the list, even though in the month March 20 to April 20 last year the most searched suburb in NSW for retirement accommodation was Bayview in Sydney’s
According to Downsizing the suburbs that retirees are currently looking at are:
1. Port Macquarie
2. Chain Valley Bay
3. Newcastle
4. Kincumber
5. Windang
In more good news, the Property Investment Professionals of Australia (PIPA) said in a recent press release that financial support programs would help to prevent any significant property price falls over the medium-term.
“Whenever there is a global financial shock, some commentators predict huge property price falls, which ultimately don’t happen,” PIPA Chairman Peter Koulizos said.
“During the GFC, prices were ‘forecast’ to fall by 30 per cent, but in many locations they held their ground and even strengthened over the months and years afterwards.
“While the coronavirus situation is somewhat different, given it’s a temporary public health emergency, I believe property prices may temporary soften by five to 10 per cent at most but rebound relatively quickly.”
Mr Koulizos said that most property markets were experiencing strong conditions prior to the pandemic, which would help to insulate them over coming months.
Compared to other economic downturns, existing low interest rates and inflation will also protect property markets, he said.
PIPA Chairman Peter Koulizos said the many financial support programs available would help to prevent any significant property price falls over the medium-term.
“Whenever there is a global financial shock, some commentators predict huge property price falls, which ultimately don’t happen,” Mr Koulizos said.
“During the GFC, prices were ‘forecast’ to fall by 30 per cent, but in many locations they held their ground and even strengthened over the months and years afterwards.
“While the coronavirus situation is somewhat different, given it’s a temporary public health emergency, I believe property prices may temporary soften by five to 10 per cent at most but rebound relatively quickly.”
Mr Koulizos said that most property markets were experiencing strong conditions prior to the pandemic, which would help to insulate them over coming months.
Compared to other economic downturns, existing low interest rates and inflation will also protect property markets, he said.
“Unemployment will go up – there’s no doubt about that – which is a similarity with other economic downturns,” Mr Koulizos said.
“But low interest rates will help property owners as well as business owners.
“Plus, the fact that you can defer your mortgage repayments for up to six months, which hasn’t happened before in my lifetime.”
However, rental markets are likely to experience tougher market conditions for a period, mostly due to the influx of holiday lets and Airbnb listings, Mr Koulizos said.
“Again, rental markets were in good shape prior to the pandemic, but there has been a significant number of holiday-related listings come on to the market over recent weeks, which is likely to continue for some time yet,” he said.
“So, rents will trend lower due to this extra supply, which will drag down median rents until those leases are finished and domestic tourism is reopened.”
Mr Koulizos said property investors were in a good position to manage lower rents for a period of time because of interest rates of between two and three per cent on many property loans.
“It is far better for this to happen now with most sales and rental markets in healthy shape before the crisis began,” he said.
“Coupled with once in a life-time interest rates, property owners are well-placed to ride out any temporary downturn.
“Prices aren’t going to go up or down by 30 per cent. There may be a slight downturn in prices over the short-term, but real estate is a long-term investment that has historically shown resilience time and time again in the past.”
ENDS
For more information, or to organise an interview with Peter Koulizos, please contact:
Bricks & Mortar Media | media@bricksandmortarmedia.com.au | 0405 801 979
About PIPA
Property Investment Professionals of Australia (PIPA) is a not-for-profit association established by industry practitioners with the objective of representing and raising the professional standards of all operators involved within property investment.
In this special Webinar, Paul Glossop from Pure Property Investment and Phillip Tarrant from Smart Property Investment discuss the effects of COVID-19 on the property market.
