The sentiment in our world today is one underpinned by uncertainty, confusion and concern. Naturally, people are scared. Lives and livelihoods are on the line.
Here, at View Bank Homes, our hearts and thoughts go out to all those directly affected by the Coronavirus outbreak. There is no understating the severity this is having on our community.
This blog post aims to provide you with facts and statistics on the Australian property market at present.
Here are the things you ought to know:
1. There is likely to be a slowing of property activity in the short term
There is no doubt that the Coronavirus Crisis has and will continue to see a decrease in consumer confidence. There will likely be a slowing of property activity because, naturally, the nature of the Pandemic is one that influences the property buying process. There will be less mass open homes and more private or virtual showings. There will be a shift away from auctions to private and off-market sales.
Since property purchases require high certainty and assurance, the decrease in consumer confidence will see a dip in the number of property transactions. This could be compounded with vendors taking properties off the market.
2. Despite the current short-term economic shock, property is still a strong asset class
History shows us that the Australian property market and the stock market act in entirely different ways. While the stock market is volatile and subject to immense shocks (as has already been seen as a result of the Coronavirus), the property market is far more stable. Here is why:
Property is an illiquid asset. The sale and purchase of property is a far longer process than the sale and purchase of stocks. The longer duration of the sale protects it from irrational decisions being made based on unfounded fears.
Property is an essential asset. It is not just a financial or investment opportunity, but rather, a basic human need. This reduces its volatility.
The property industry underpins the Australian economy. That is why the Government and Banks are steadfast in their commitment to do everything in their power to prevent it from falling.
As the Australian Banking Association’s chief executive, Anna Bligh stated earlier this month, ‘banks are in the best ever shape to face this challenge, they are well capitalised with strong balance sheets and are open for business… banks stand ready to support customers’.
Such sentiment has been further reflected in the various efforts of the Banks and stimulus packages put forward by the Government.
3. Demand for property will continue to remain strong in long term
While the media can paralyse us with fear and attention-grabbing headlines, there is still demand for property. In the short-term, demand will be present because of the essential need for property. In the medium-to-long-term, demand will only intensify.
Population growth rates continue to accelerate, as Australia takes its position as having one of the fastest growing populations among advanced economies. Such a trend is expected to continue into the 2020s.
In addition the property industry is currently seeing a decrease in supply. As discussed in The Property Couch Podcast, a property shortfall is expected. Hosts and property experts, Ben Kingsley and Bryce Holdaway, state the projected construction forecast will see nationally, a roughly 35,000 property shortfall.
Couple this with the trends like the millennial renting generation and less people per dwelling, demand in Australia’s residential property market is expected to remain stable in the short-term and flourishing in the long-term.
4. Interest rates are at an all-time low, making this a prime time for those who are ready to purchase
While it is important to acknowledge that for a portion of Australians, the income challenges at present are real, for some, current financial limitations are largely driven by restrictions to mobility. And for even more, their financial position remains largely unchanged.
As Kingsley and Holdaway state, this can be ‘as worse a correction that we make it, or as good a correction as we make it’.
The Government, the Reserve Bank and all Australian Big Banks are determined to help prevent a coronavirus-led recession. Interest rates are at an all-time low of 0.25%. Numerous efforts are being undertaken to ensure Australians continue to buy, to ensure economic activity is encouraged.
Thus, the question ultimately becomes, is this a good time to buy?
When hysteria from the media is cut away, and facts and information are laid on the table, one could easily conclude this is a lucrative time to either enter the property market or further enhance one’s property portfolio.
Ultimately, the answer to such a question will differ from individual to individual. From where we sit, for those with security of a job and sufficient short-to-long-term cash flow, this may be as better time as any to enter the property market and solidify your financial position for now and for the years to come.
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