The 2019 post-election property boom officially ended in April 2020, with the advent of COVID-19. As with all booms that end, some pundits will suggest that it represents the start of a crash. Without doubt, the risks lurking in this current market exceed anything in recent memory, including those risks experienced in the 2008 Global Financial Crisis (GFC).
No Panic selling – unfortunately for bargain hunters, there has been a distinct lack of panic selling so far. The Government’s Job Keeper, Job Seeker and other fiscal economic support packages, have done a great deal to sure up the economy. The Four big banks have been directed to provide bridging finance for eligible companies to help them to continue to pay wages while they wait for their Job Keeper payments to begin. Also, banks are offering mortgage payment holidays for up to 6 months. This has meant that home owners, whom have lost their jobs, been stood down and/or closed their businesses, have been granted crucial relief.
Therefore, we can only see a scenario where increased selling may occur across the spectrum if unemployment remains stubbornly high when bank mortgage holiday repayments cease in late 2020. However, that is six months down the track.
Stock levels – we have noticed one interesting side effect in the market. Stock levels have dropped faster than buyer demand. While buyers are still around, many sellers have opted against coming to market. In the long run, all markets will revert to trend lines, but in the short run, markets are always subject to short term supply and demand.
Because housing stock (or supply), at the moment is quite low, there is a good opportunity open to those who would like to sell now. This opportunity for vendors to sell has come about because some vendors have mistakenly felt that the market had shut down because of COVID-19.
Competitive buying – in support of the above mentioned situation, some sales during COVID-19 have been buyer competitive. This is a by-product of low stock levels and buyers remaining confident about the future.
Transaction numbers – the number of sales did drop in April. Primarily, the reason being low stock quickly leads to lower transactions. Social distancing rules also reduced the number of people who could attend open inspections and auctions. Normally, when stock is low, active buyers tend to absorb available stock very quickly for the Fear of Missing Out (FOMO).
However, low sales on low stock levels can also suggest that buyers and sellers may be struggling to agree on a fair market value. While buyers are still prepared to make offers, those offers don’t always meet the vendor’s expectations.
Enquiries – fortunately, enquiries have remained very healthy. Even during the 2017-2019 credit squeeze, interest in real estate remained high. The desire to act is not muted by circumstances such as these. This highlights the fact that buyers have not disappeared. If coming out of the COVID-19 pandemic, in Australia at least, is forthcoming before too long, long term damage to the economy will be avoided.
Rental market – this is definitely the softest segment in the current property market. The pain of job losses being experienced in the labour market has flowed quickly into the rental market. Vacancies and arrears are up, leasing periods are longer and only some landlords are providing rent relief. If the economy can get back to normal in the near future, worse pain in the rental market can be avoided. Unfortunately, the rental market has borne the brunt of the COVID-19 property market thus far.
Original Article sourced from Harris Partners Real Estate, written by Peter O’Malley
