What will a COVID-19 property recovery look like?
Gazing into a crystal ball is a fraught exercise at the best of times, but many buyers and sellers are anxious to know how the property market might behave once we’re through the worst of the coronavirus crisis.
To find that answer, you need to look at the price levels immediately before and during this crisis. We’d be happy to discuss with you how the market has been performing, both in terms of the home you wish to sell and the one you’d like to purchase.
You should guard against general statements in the media, which treats the property market as a single entity. The sector consists of hundreds of micro-markets, which can then be sliced thinner into segments for houses, units, of-the-plan apartments and land.
No enthusiasm for discountingPredictions of prices falling off the cliff have proven to be nonsense. Values have held up remarkably well. What has turned south has been listings and sales volumes, each tumbling by about a third.
Sellers who stayed in the market when the pandemic struck have shown little enthusiasm to discount their asking price beyond a typical willingness to negotiate.
As a result, buyers are either finding their ideal property and taking the plunge or still circling for a distressed sale or bargain. Whatever the circumstance, the property market has continued to transact, albeit at lower levels.
Most property markets were humming before the virus crisis. Sydney and Melbourne had recorded annual price growth in double digits, and Brisbane’s values were at record highs, according to property researcher CoreLogic.
So what does this mean for property in a post-COVID-crisis world?
Pent-up demand will emergeA significant influence will be the market disruption that we’ve experienced since December. The market went quiet in the lead up to Christmas, as it usually does. Then we became distracted and nervous because of the bushfires. No sooner had they been extinguished than the coronavirus hit. So, many of those who thought back in October that they might sell have stalled their ambitions.
Next, when lockdown restrictions ease, we’ll likely be entering property’s Winter Market. It’s a myth that winter is a bad time to sell, but there are plenty of vendors who’ll want to wait for spring.
Don’t wait for SpringSmart sellers will see winter as an excellent time to transact.
Why? Because the Spring Market is likely to be crazy. The pent-up demand in the market, combined with the belief we’ve seen the last of the virus, will see listings go through the roof. Buyers will rarely have such choice and vendors may find themselves competing for attention and even struggling to achieve anticipated prices.
We’d be happy to discuss your options so you understand the dynamics of your local market, and what opportunities exist for your next purchase. Experience tells us smart sellers will get their property on the market sooner rather than later.
Additionally, many dynamics will power local property markets in the months ahead. These include:
The lockdown will ease. A so-called “new normal” will exist that is underpinned by social distancing, but we’ll see a return to private inspections of properties and (hopefully) open houses.Most vendors will remain reluctant to discount their asking prices, knowing the market will strengthen.Mortgage rates will stay at records lows. Many 3-year fixed terms are at less than 3%. This drives affordability and buyer optimism.Mortgage repayment flexibility from banks has meant the sudden rise in unemployment hasn’t hurt property values as they might normally. The result: property will rebound off a stronger base-price.Investors have moved cash from the stock market and now seek a more stable, longer-term return from real estate.The low value of the dollar is attracting overseas buyers, which will fortify prices, especially in the cities.The Winter Market will see pent-up demand for property re-emerge with opportunities for sellers and buyers alike.The Spring Market could be wild! Many sellers will want to put their property on the market in this period. If there is a glut of properties, this could adversely affect prices.