The COVID-19 prevention measures have placed a massive strain on so many businesses and households with many outcomes not yet measured, at least until the crisis is over. Unemployment is sky-rocketing as businesses are forced to close doors, International tourism is at a standstill and while some of those closures are temporary, others will simply not be able to reopen. Even with government assistance to help see people and businesses through, many people are struggling to make ends meet.
What consequences will that have on the property market? Early predictions were that house prices would plummet as buys would run for the hills...only, that's not what we are seeing. With Darwin being the only exception, Australia capital cities have seen property prices higher than this time last year.
Why is that?
Many positive factors have helped bolster the property market in this time of crisis. Time will be the only way to tell what the long term impact will be, for now, Australia looks to be holding its own.
Concentration on mortgage repayments and savings
People are putting their money into the most essential living costs, as well as saving to guard against an unpredictable future. For some it's down to smart saving; spending less money on luxuries and concentrating on the essentials through the crisis. For others, saving is forced. They are not able to eat out, to go to the pups, to go to the movies or go on holiday so staying home is proving to be very cost-effective. Even just the saving from not taking public transport or filling the car with petrol has been a lifeline to many families.
Support from banks
Banks have been very supportive of their customers with risk management strategies in play. This might be the biggest impact maker in terms of keeping Australians in their homes during the crisis. As well as holding the low-interest rate, banks are also giving a grace period on mortgage repayments to those in crisis. Due to the increase in restrictions in some areas of Australia, extensions have been offered on grace periods to those who cannot currently make their mortgage repayments. Without this support, we might see a very different story in terms of distressed sales and tumbling property prices.
Those in need can take up the bank's offer of a six-month mortgage payment freeze.
Support from government
Government payments to help support those left without income or to help businesses owners continue to employ their staff while under forced lock-down has helped ease the pressure on many families. As well as this, there has been an increase in buying and building stimulus packages to encourage those who are in the position to buy or build their first home to take that step. These support packages are making a difference and providing the relief many people need to make ends meet or see their goals through.
Rental accommodation hit hardest
The hardest hit are the ones in the hospitality, tourism and education industries which has seen unemployment predominantly fall on younger shoulders. That means that the majority of those at risk are renters rather than homeowners. There is currently a policy in place that secures the safety of renters with landlords unable to evict tenants even if they fail to make their rental payments. This is affecting the income of investment property owners who are either unable to retrieve their payments or left with vacant properties that either are difficult to find tenets for or need to take a big hit to prices to accommodate the new situation as well as new competition from the wave of short term holiday accommodation that switched to long term at the beginning of the crisis.
With tourism at a trickle, many short terms stays have had to become long term rentals, putting pressure on investment property owners to compete on price.
Because of this many smaller sized investment properties (units and apartments) are now on the market giving more options to first homeowners looking for affordable homes.
Another hit to rental accommodation investors is that many international students have been unable to attend university here in Australia leaving many rental accommodations near universities expectedly vacant.
Some industries are thriving
Just as we have seen in previous times of crisis, not everyone is under the pump. Some industries are thriving, some people feel financially secure and some people have money to spend and invest with. Those who can hold off selling their homes are putting their plans on hold, meaning that while there are fewer buyers, there are also fewer properties available keeping the supply and demand at status-quo. The security of the mining sectors in Queensland and Western Australia has been a big reason behind the strength in property sales in these states as well as the additional employment of government service positions in Canberra keeping the ACT in good steed.
While the big picture is still uncertain there is a short-term boost predicted once Melbourne is released from lockdown.
If you have any concerns about purchasing your home be sure to discuss the property contract in-depth with your conveyancer before you sign to buy.