Property Market Effects- News Covid19

Property Market Effects- News Covid19

Property Market Effects- News Covid19

REA Summary

  • 6 predictions for Australia's property market post COVID-19 – Nerida Conisbee (realestate.com.au Chief Economist)
    • There has been a significant change in sentiment on realestate.com.au over the past two weeks – buyers are still curious and the number of searches has increased significantly
    • Search activity on the ‘Buy’ section of realestate.com.au is now 35 per cent more than this time last year, and despite the comparison being between an Easter weekend and a non-Easter weekend, the upwards trend is clear
    • The high levels of search activity haven’t yet translated into high levels of enquiry, but it does suggest that predictions of Australia-wide house price drops of 20 per cent or more are way off the mark
    • Here are six other predictions for the real estate industry post COVID-19:

Canberra and Perth will be the best performers

      • Canberra property market continues to show very different behaviour compared to the rest of Australia – search is well up on last year, enquiries for new / existing housing is showing far greater strength, and importantly listings are increasing – with the high levels of government employment likely driving the higher levels of confidence in the market
      • While Perth is not showing significant changes it is likely to benefit from a strong mining sector, and so long as mines aren’t shut down because of health risks / challenges securing fly-in/fly-out workers, the WA economy will do well – which is good news for Perth

Suburbs with high levels of rental housing will be most impacted

      • Rental market is slowly improving due to a wide range of federal and state government measures to protect renters and landlords
      • While search numbers for rental properties on realestate.com.au fell in the two weeks following the lockdowns, it has now started creeping back up
      • However there are still some areas struggling with rising vacancies, with suburbs that have a lot of very similar apartments seeing the biggest jumps in rental listings – likely to be driven by a number of things:
        • These areas can often be located close to universities and therefore typically accommodate both local and foreign students – the impact of COVID-19 has seen many local students return to their family homes while many foreign students have not returned to Australia
        • Apartments are more likely to house younger people who are more exposed to job losses
        • The similar nature of each apartment means that there may be a more competitive rental situation – tenants might be prepared to move to an apartment in the same apartment if a cheaper price was offered

Premium suburbs will better-weather COVID-19

      • Highest views per listing on realestate.com.au are still dominated by houses in premium suburbs in our capital cities and are likely driven by people looking for bargains, as premium suburbs are generally perceived to hold value best during downturns
      • Still likely we will see some level of price decline in these areas; the imbalance between demand and supply will likely provide a limit to how far they fall

Auction activity will eventually return to normal

      • Ban on open-air auctions has led to a dramatic drop in auctions, with 95% of sales now made through other means
      • Once the ban is lifted it’s likely there will be a return to higher levels of auction activity as live on-site auctions work very well in some markets – particularly Melbourne, Sydney and Canberra – and there is no doubt that a lot of agents are keen to get back to running them

House and land to perform better than off-the-plan apartments

      • Investors and first homebuyers are both active buyers of new homes – whether they are house and land or off-the-plan apartments, however investors dominate apartment purchases while first homebuyers are particularly active in house and land
      • Buyer enquiry for both house and land and off-the-plan are down compared to earlier this year, however first homebuyer enquiry is up compared to last year while investor activity is still down
      • This is leading to far greater levels of enquiry for house and land compared to off-the-plan apartments and for that reason, house and land will recover more quickly post COVID-10

Industrial, rural and agribusiness will hold their value best

      • Commercial properties for sale and lease have mainly seen a drop off in activity with shopping centres and retail properties the most impacted followed by hotels and office property, and it is likely that all these property types will see some reduction in rent and/or values
      • The two property types that are doing particularly well are industrial properties with leasing demand remaining constant – an acceleration of growth in online retailing is likely to be driving this
      • Demand for rural and agribusiness properties is up compared to the same time last year which is likely being driven by the breaking of the drought
  • Governments keep building approvals moving during COVID-19
    • Planning ministers have signed off on a national set of principles designed to ensure the pipeline of development approvals continues during the COVID-19 crisis, protecting jobs, businesses and the economy
    • Agreement states that all levels of government will work together to ensure planning approvals run as usual, which is good news for industry and consumers and according to Cameron Kusher (Executive Manager – Economic Research at realestate.com.au) is a boost for consumer confidence – “I think this is the right move to do to signal people can go out and get an approval”
    • While there are no new legislative measures to improve the process, the statement signals a commitment to support the industry and improve the planning process long term – “The fact that the different jurisdictions have agreed to share information and make improvements to the planning process is encouraging”
    • However it’s expected that building approval numbers will likely take a hit as developers lose confidence amid COVID-19, and choose to delay commencing construction of new projects

 

Other Headlines Summary

  • 'Tough set of numbers': Victorian housing sales slump to hit government coffers (THE AGE)
    • The state government will lose up to 9 per cent of its stamp duty revenue, with Treasurer Tim Pallas conceding the economic impact of Victoria's coronavirus pandemic could be worse than expected
    • The Victorian budget is highly dependent on stamp duty from property sales and house prices are now expected to tumble by 9 per cent, with the government expecting roughly the same percentage point decline in stamp duty revenue
  • 'Catastrophic' slump predicted with unemployment to double and house prices to tumble (THE AGE)
    • According to modelling, Victoria is set for a "catastrophic" economic downturn with the unemployment rate to double to 11 per cent and house prices to drop by almost 10 per cent
    • About 270,000 people will likely lose their jobs and the unemployment rate is set to peak at 11 per cent in the September quarter, with the state's economy set to shrink by an enormous 14 per cent in the June quarter relative to previous forecasts
  • Australian government to purchase $100m of fuel for stockpile (THE GUARDIAN)
    • The government is taking advantage of the historically low prices oil prices to do something about the country’s own fuel reserve, however it won’t be kept in Australia as yet because there is nowhere to hold it
    • Discussions have already begun to ensure there’s enough storage in Australia to keep enough fuel domestically, as well as across the international supply chain
  • Share market tipped for losses as oil dips further (THE AGE)
    • The Australian share market is bracing for more losses this morning after oil prices continued to collapse overnight with Brent crude futures falling to a 20-year low, and glum forecasts by companies foreshadowed the worst economic slump since the Great Depression
  • Head of pandemic recovery taskforce urges tax and gas reform (THE AGE)
    • The head of Australia’s COVID-19 business taskforce is urging state and federal governments to pursue tax and regulation changes that will deliver “immediate kicks” to the economy and build greater self-reliance after the pandemic
    • Neville Power, chairman of the National COVID-19 Co-ordination Commission, nominated incentives for business investment, the reskilling and redeployment of displaced workers and cheaper and more reliable gas supplies as priorities for restarting the economy
  • REINSW is calling on the state government to slash stamp duty in response to the economic fallout from COVID-19 (ELITE AGENT)
    • The Real Estate Industry of New South Wales, who has argued for the removal of stamp duty for years, now says reducing it offers a lifeline – “We’ve called it inefficient, unreasonable, unfair, an unnecessary burden…. But now, as COVID-19 threatens to tear the economy apart, a substantial reduction of stamp duty represents a lifeline”
    • A significant reduction in the rate of stamp duty would not only benefit the housing industry through an increase in residential transactions – providing more immediate economic benefits, but there are other layers of opportunity that would be revealed
    • A property transaction sets in motion a ripple effect of other immediate business opportunities, and the stamp duty destined for the state government could otherwise be distributed through the economy to benefit a multitude of businesses, to reduce the size of the stimulus needed, and to support workers
    • “In this COVID-19 world, the goal posts for every industry are shifting. Every business owner and operator are trying to keep the wheels turning. For real estate, and every business in the flow-on supply chain, stamp duty is the brake.”

 

Do you own an investment property?

Download our free guide 6 Tips for Preparing your Investment Property for Tenants.