Like the rest of the world, the team at Your Investment Property deals with and responds to the COVID-19 threat. It is a changing crisis that evolves daily as new information becomes available and new data becomes available.
There is no denying that this moment is very unusual – an unknown and untested moment. It is natural to be careful and concerned. When you don't know what to do next, the best solution is to seek the help of an expert, and that is exactly what we have compiled for you here.
Between them, the people who give us their point of view on the following pages have collectively accumulated dozens and dozens of years of experience in real estate investment.
We have gone through recessions, the GFC, mining booms and busts, interest rates that have grown by 20% and everything in between. While none of these scenarios looks like the one we currently have, they do reveal some key lessons.
In the magazine Your Investment Property, it is always our mission to educate and inform. It is a time window that is unlikely to repeat itself. Although it looks like the quarantine period is likely to be longer than expected, the stimulus response will also be much greater.
So what do experts think about the changing situation of COVID-19, where it is headed, and how can investors stay calm and not give in to fear-based decisions?
Cate Bakos
President, Real Estate Buyers Agents Association of Australia (REBAA)
"Things got serious for most of the landowners in our country on Friday, March 13. The mention of a pandemic seemed to propel us into a frightening reaction during those early days.
"Two camps of buyers are now apparent: those who are afraid and happy to sit in a" wait and see ", and those who are desperate and feel the mood" buy now or wait a long time. " Sellers may be nervous, but many buyers are closing the money gap between their price expectations before and after COVID-19.
"With the most recent rate cut in the RBA, combined with stimulus grants from our federal government, we must anticipate that when we recover from COVID19 (and recover), our rebound could be much more pronounced than that of the last recession
"Perhaps for the first time in the history of humanity, 7.8 billion people are all focused on a common goal. When we all emerge from our cocoons in the second half of 2020, there will be a huge release of pent-up demand ”
"The borrowing capacity will be considerably higher and, combined with the limited available stock as suppliers postpone their sales plans, this cocktail could generate an exhilarating set of price gains for our capitals. Not to mention the implication of cash flow for investors: recent consecutive rate cuts will keep many investor portfolios in positive territory, which will alleviate the immediate need to liquidate investment property if times hard hit household income.
"The obvious questions remain: how long will it last and how will we navigate with our unemployment figures remaining relatively stable? There is no debate that COVID-19 will harm many households and businesses financially, but we must remember that, like all shocking world events, there will be a recovery.
"It is the way we treat all these moving parts that will challenge us and our government in economic history."
Ben Kingsley
President, Australian Real Estate Investors Council (PICA)
"As of this writing, I have been supported by several recent developments.
"The first is the approach of the governor of the RBA" all that is necessary "/" nothing is excluded "in the bank's efforts to keep the money markets liquid and credit too as cheap as possible to ensure that businesses, jobs and income remain viable during this period. temporary period.
"At the same time, the bank reports in the medium term that the cash rate remains at 0.25% until it reaches its objectives of an unemployment rate of 4, 5% and inflation in the range of 2 to 3%.
"Second, the banks are announcing that they will offer home mortgage customers of businesses and individuals a six-month mortgage repayment vacation, which will reduce the risk of business closings and payment defaults and, therefore, the risk of significant price corrections in the real estate market.
“Before the escalation of the health crisis, the underlying demand for real estate was strong and supply was limited. Once we get out on the other side of this health problem, I expect that this demand will increase dramatically as the fundamentals of the real estate market are solid.
"Remember that you should never speculate on property, like any investment. So if you are buying for the long haul, I think you will be well rewarded for your actions today. "
Shane Oliver
Chief Economist, AMP Capital
"The coronavirus has a huge impact on our way of life. If it is primarily a health crisis, the economic benefits are also significant. We expect at least two negative quarters GDP growth in the March and June quarters, with the risk that the September quarter will also be negative.The contraction could be deep, as large segments of the economy will be largely closed – tourism, travel and entertainment , with strong repercussions on certain parts of the retail trade.
"Past declines in the equity market have had a mixed impact on property prices. The 50% share market crash in 1987 actually pushed up housing prices, with investors being passed from stocks to real estate. But the key is what happens to unemployment, as it often does force sales and demand for crimping.
"In 1987, the economy remained strong and unemployment fell, but recessions in the early 1980s and early 1990s saw average house prices in national capitals 8.7 % and 6.2% respectively while unemployment increased. The 55% drop in the GFC stock market also resulted in a 7.6% drop in house prices, even if it weren't a recession, as unemployment is increased from 4% to almost 6%.
"Liquidation rates and auctions are showing signs of slowing down this month. This may reflect a growing willingness on the part of buyers and sellers to suspend real estate transactions to avoid being exposed to the virus. Social distancing policies will only intensify this, which could smooth out price gains.
"A relatively short recession that would see unemployment rise to around 7.5% would likely only bring prices down to around 5%, then prices would rebound. A deeper recession risks triggering the underlying vulnerability of the housing market, underscoring the need for the government and the RBA to minimize the fallout from COVID-19 closings in terms of businesses and enterprises. jobs. »
Peter Koulizos
President, Property Investment Professionals of Australia (PIPA)
"Unfortunately, the situation for COVID-19 will get worse before it gets better. Australia has not yet reached its peak contamination period, but when it does, the situation will slowly improve, as evidenced by what is happening in China and South Korea.
“Regarding property and real estate investors, don't panic. As happened in previous crises such as the recession of the 1990s, the GFC, SARS and swine flu, the economy and the stock market suffered a blow for a relatively short period , then rebounded.
"With regard to property, the effect of these crises on Australian residential property was negligible. In the depression of the late 1920s, however, the economy, the stock market and property all suffered a huge blow, but as the COVID-19 crisis did not last as long as the depression, The impact will not be as great.
The key to this is cash. Many of us real estate investors are rich in assets but poor in cash, but in these difficult times, cash is essential. I hope you have cash hidden for a rainy day (because the rainy day is here). If you do not have access to money, it would be worth talking to your bank about the possibility of entering into a line of credit.
"In summary – stay calm! Rush decisions made at this time can often be regretted in the future. "
Eliza Owen
Head of research Australia, CoreLogic
"The coronavirus epidemic clearly presents a downside risk to the Australian housing market, but in the end, the impact remains very uncertain. New information and political responses are happening daily, which makes it impossible to provide a reasonable forecast of capital growth.
"An additional context, however, remembers the fundamentals of the real estate market and the peculiarities of a slowdown caused by a pandemic.
“Property is less volatile and slower to react to market shocks than stocks; it is a consumer good and is linked to the fundamentals of employment opportunities and income growth.
"We have gone through recessions, the GFC, mining booms and busts, interest rates that have grown by 20% and everything else"
“Transaction activity is likely to be more impacted than market values. As consumer confidence declines and labor markets are disrupted, more and more Australians are likely to suspend high hiring decisions until there are more certainty about the economy, employment and household finances.
"In addition, stimulus measures, including emergency monetary policy parameters and soaring budget spending, should help cushion the impact of the decline in business activity, but a recession in the first half of 2020 seems likely.
“The current high level of household debt amplifies the risk of unemployment for housing market conditions. However, the areas severely affected by social isolation would be less resistant than others to recover from the coronavirus pandemic.
"Given the peculiarities of the current downturn, it is likely that parts of Australia will experience a stronger demand for housing, including demand for housing, than others. These include areas where workers cannot do their work remotely and may have to sacrifice income if social distancing is imposed, where the frequency of casual employment is high and where concentration employment in the affected industries is high.
"Our views and research on market results for the coronavirus will continue to evolve as new information becomes available.
Michael Yardney
Director, Metropole Real Estate Strategists
"One of the main lessons I learned from previous downturns is the importance of taking a long-term perspective, which always outperforms reactive short-term thinking. These are really the fundamentals of real estate that count and drive our markets in the long run. Things like demographics, supply and demand, affordability, availability of finance and local economic trends.
"Of course we all know the old adage: be afraid when others are greedy and be greedy when others are afraid … But it is normal human nature to find it difficult to buy your new home or investment property when everyone runs away thinking the world is coming to an end.
"However, now that I have invested through eight real estate cycles, I have found that it is exactly these conditions that present the best opportunity. This means that the time has come to prepare to take advantage of the opportunities the market will offer.
"After each global disruption, there has been an increase in real estate prices, and there is no reason to suggest that it will be any different, because the fundamentals are still solid – like our record interest rates and our first record buyer numbers, high immigration (high demand) and slowdown in construction (low supply). "
Simon Pressley
Head of real estate market studies, Propertyology
"We have maintained our position since December 2019, when we described the fundamentals of the Australian real estate market as the best they have been in over a decade.
"COVID-19 is a virus, not a structural weakness. This basically means that the "pause button" will be pressed for several months while everyone is working together to kill this germ. While real estate transaction volumes will naturally decrease during quarantine, people will continue to buy, sell and rent property. Housing is an essential commodity.
"Generally speaking, the pause button will be pressed on real estate prices. Record interest rates to support this. Yes, there will be major disruptions for everyone for several months. But this is a known cause with a known solution and a finite amount of time.
"Perhaps for the first time in the history of mankind, 7.8 billion people are all focused on a common goal. When we all emerge from our cocoons in the second half of 2020, there will be a huge release of pent-up demand, coupled with the largest collective volume of stimulus ever seen, in Australia and around the world.
"The other side of the cocoon is the same incredibly tight housing supply and low interest rate environment as it did when we entered the cocoon. Frankly, I am optimistic about what awaits us!
"For those with organized finances, the quarantine period offers a small window-in-time buying opportunity that is marked by the solid start of 2020 and when the masses burst out of these cocoons."
