How COVID-19 Is Affecting The Australian Property Market – 3/4/20

The situation with the corona virus both locally in Australia and worldwide is developing daily and the effects it’s having on the economy and the property market is also changing.

In this episode we look at the current data and what is happening to The Australian property market as a result of the corona virus.

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Introduction – 0:00

Are We Seeing Property Markets Decline? – 1:22

Property data seems to show price rises in most capital cities during the month of March – 4:28

How the stimulus may affect property prices short and longer term – 6:58

There are still plenty of people looking for properties – 10:49

This is not a time for everyone to jump into the market – 12:14

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How Will Corona Virus Effect The Property Market? Commentary 11/3/20

Transcription:

Ryan 0:00
The situation with the Coronavirus, both locally here in Australia as well as worldwide is developing every single day and the effects that it’s having on the economy and having on property markets is also changing every single day. Me and Ben recorded a video a couple of weeks ago about how this may play out. But that was in the really early days of this happening before lockdown and social isolation and all of this sort of stuff we’re going through now. And so in this video, we’d want to give an update about how the Coronavirus may affect the property markets moving forward now that we actually have some data to look at, of what’s happening in the property markets in the last couple of weeks. So to go with the Ben Everingham, buyer’s agent from Pumped on Property, how’s it going, Ben, I can see you’re at your home office now.

Ben 0:46
Loving the home office, family pics in the back swimming in the pool with the kids this morning, taking two hours a day out of community man is meant.

Ryan 0:55
So I guess a little bit of perks there for you not having to commute to work. But obviously this has had a huge effect on society and a lot of people’s lives. We’ve seen a lot of people lose jobs or jobs go on hold, my partner got made redundant in her role. My ex her company is going into isolation and not isolation hibernation at the moment. A lot of people are kind of feeling the effects of that. So let’s talk about obviously this is happening in Australia, this is affecting the economy. Are we saying this actually rollover into the property market and into I guess what most people would expect is a decline in the property market because of this decline in economic activity. And we you know, we’re not seeing that be the case.

Ben 1:40
Look, I’ve spoken to at least at current and previous clients in the last two weeks, and I’ve really got a good sense of what the average Ozzie like myself is feeling during this time. So it’s a little bit too early to have quarterly figures on what’s happening in the property markets. But obviously, you and I in front of us now have some really good updates from corelogic in terms of like their weekly and daily indices index. So what we’re definitely saying is a retraction in the number of people going to obviously, open homes, which have now been cancelled options which have been cancelled, and the auction clearance rates, which are a good indicator, and Sydney and Melbourne, have come back from about 70%, three weeks ago to 50%. Now, which is a leading indicator that demand is obviously dropping off. But a lot of people that rock up to an auction are also sticky bake in and having a look at what’s going on with their neighbor’s home. So you know what I’ve found just because 70 people rock up doesn’t mean that they’re 17 registered bidders away. we’re noticing that I also called logic sent me an email the other day, Tim lawless. And he was saying that the number of comparative market analysis, which is like the number of agents that go out and appraise properties, has dropped to its lowest level since the last GFC. So again, another good leading indicator that stock in market over the coming months, because they’re doing less appraisals, it’s going to mean less sales down the line, which is a good indicator of volume for the future as well.

Ryan 3:10
Yeah. And I think that’s something that people need to look at and think about as well. Because obviously, if we’re going to see a massive decline in the property market, then you’re going to see a flood of properties onto the market without that flood of buyers, as well. And so seeing actually, those valuations drop means there’s less people actually considering selling in this market and whether or not that has to do with banks offering support in order to freeze mortgages to help people with cash flow, or with the government offering their stimulus packages that they’re offering at the moment. We’re not sure exactly why people are reacting that way. But that at this point in time looks like that’s what’s happening.

Ben 3:51
Look, it’s pretty simple. From my perspective, like people don’t feel comfortable going to open homes at the moment, people aren’t sure if it’s the right time to sell their property. Other people aren’t sure if it’s the right time to buy property. So you know, a combination of things are happening at the same time. Now, the beautiful thing about this is if supply was going up and demand was going down, we’d have a major issue which would result in a market decline in a pretty rapid rate. But what we’re seeing is a decline in the number of properties for sale as well as a decline in the number of people looking at properties for example, that this way, my team and I inspected seven properties will probably placed four or five authors will lose three of them because other people will buy them. Last week we inspected I think eight properties placed offers on six and only were successful with two so as you can see from this data at the moment, even the quarterly numbers in March, which was probably the worst month for sentiment in the last 10 years in Australia. We still saw prices across all of the major capital cities except Perth continue to move forward.

Ryan 4:56
Yeah, so I will overlay that data so people watching the video can see it and this is something that corelogic put out their property value index so this is kind of a change in i’m not sure if this is exactly value or they use like a hedonic home value index so it takes into account not just prices but other things in that to kind of get a quick estimate on how things are progressing in the market and you can see here that basically as ben said it’s every capital city other than hobart has actually gone up for the month of march and if we go across to the daily indices then you can see that on a day by day basis for at least the major capital cities sydney melbourne brisbane including the gold coast adelaide and perth you’re either seeing that being stable or that actually going up and so when you start seeing the daily going backwards when you start seeing the monthly is going backwards as well then obviously there’s cause for concern there and i guess i kind of expected to look at this and to see everything in the red if i’m honest with you given what has happened over the last few weeks and to see this or in the green is quiet styling and you know me and ben don’t have an opinion on this we don’t know exactly how things are going to play out what we want to do is provide you with some of the data that we’re looking at some of the opinions and information that we’re getting from other people to kind of build a picture of where this may go and obviously every day is changing it feels like every second day the government’s releasing new stimulus packages into the market as well whether that be support for people losing their jobs or childcare or health packages and that obviously will have an effect on prices as well

Ben 6:51
and can i can i talk to that for one second yeah

Ryan 6:54
i think that’s really important to talk about

Ben 6:56
around the stimulus so a lot of people expected a run on the properties and a run on the banks during this particular time or that’s what the early commentary was but you know for the average person that was working full time for a company whose revenues declined by 30% now you know those companies and they are going to get support from the government to pay the wages up to you know $750 a week so if you look at the industries that have been most affected you know jim’s healthcare in a way like in terms of like the beauty industry if we look at the travel industry the hospitality industry the retail industry most of the people in those industries are in the lower band of income earners in australia and a lot of them weren’t even making 750 bucks a week off after taxes anyway so a lot of these people are not just going to be the businesses are basically getting free employees which makes the businesses not need to obviously turnover as much to make the profit or breakeven and the employees are getting more money so that’s one major thing you mentioned before that the australian government has stepped in with $100 billion to bail out the banks and what that means is the banks can now freeze people’s mortgages for up to six months even longer if people need them to so you get in significant financial hardship on an investment or your home now that is a massive get out of jail free card which may be there were going to be a number of properties that came on but that is going to really help people and then as you said like with all of the other personal and business stuff coming through on a daily basis it’s just incredible and one thing like stepping up a level that i think people need to understand is that in the last month the governments around the world just in the big countries the j 20 countries have committed to $8 trillion worth of money now this is important to know because that was money that’s either being created out of credit which wasn’t here before or it’s being printed around the world in the bank and that is insane to know because that is $8 trillion that was not here a month ago that’s going to come through the global system a lot of it’s going to go back to the banks and the government but a lot of that is going to go into long term asset prices whether it be stocks or whether it be property so very very important to note that the long term i think looks incredible it’s just the short term will it last six months 12 months two years we don’t know

Ryan 9:21
yeah and i think that’s really important for investors to look at obviously you’ve got the short term with this virus and how that dampens economic activity restricting us to our houses not being able to go outside and not being able to go shopping all of that sort of stuff but as ben was talking about this money you know kind of has to come from somewhere this value has to come from somewhere and while they print money out of thin air and just kind of make it that doesn’t add productivity to the economy and that doesn’t necessarily you know life they didn’t just make it out of thin air it has to come from somewhere and what that does is then have rippling effects Through the economy and rippling effects through asset prices as well. And what you’ll often see when things like this happen is they have a certain impact on the economy and stabilizing the economy and keeping it going. But then they can also have this runaway effect, where asset prices largely outperform growth in productivity or growth in incomes because of this stimulus that they’re doing. And so that’s a factor to take into account of when a property prices go. In the long term when a share prices go in the long term, when you’ve got governments creating all of this either debt credit, or printing money out of thin air, how’s that going to affect things long term. And obviously, we’ll keep commenting on that as we start to see that in the markets, but that’s something that is going to have an effect. You know,

Ben 10:48
one thing that I’m noticing in Brisbane is that there’s still plenty of people looking for properties. There’s also plenty of opportunity currently around so an example of this was a couple of weeks ago, we attempted to buy a property. Unfortunately, the agent did the dodgy and sold it to someone in his own office without telling us but this particular property was a deceased estate. There are three kids, I think that all living in South Australia, the agent was one of the agents that doesn’t have massive integrity. And in every suburb in Australia, there’s at least two out of the three top performers that sit in that category. And he effectively, the market value for the property a month ago was probably $430,000, at least maybe 435. He set the expectations because they were interested sellers around what he thought it should sell for and ended up buying it either himself or for one of these colleagues for $373,000. So that represented about what $50,000 reduction in the current market. And you know, it’s not like is every man his dog being forced to sell at the moment. But when these deceased estates when the divorces come through, when someone is in financial hardship, and there’s not 20 people rocking up to the open home, like there were two weeks ago, that is a big buying opportunity.

Ryan 12:11
Yeah, and so there are still opportunities in the market for people. Now, this is not a time for everyone to go ahead and jump into the market, especially, we haven’t had I guess movements where you’ve seen a massive decline. And that started to stabilize, you know, we kind of had that around June last year where we’re starting to stabilize at the bottom there. So it’s not kind of the bottom of the market that we would see right now, obviously, but I do think there’s opportunities in the market right now gibbering giving the lower amount of activity, but it’s just for the right type of people buying the right type of asset classes, not just anyone in his dog jumping into the market.

Ben 12:56
Now, you know, you know, people that shouldn’t be buying now, people that are living to wait await without a good savings buffer in place or equity buffer in place that don’t have at least one very stable job, if not two, between themselves and a partner. You know, the people that should be buying and the people that have been sitting there waiting for this opportunity for a while that are in a strong position that, you know, know that they can stomach this type of environment, because even if you’re in a financial position to do something, this isn’t for everyone, you could have one of three things happen, you know, asset prices could decline a little bit before they go up. And so that can scare some people, you know, other other scenarios, they go flat for a period of time or another scenario, like the last time this happened in 2001. asset prices actually in property increased by 1015 20% a year across most of Australia, while the stock market declined by 40%. Over the same time, sometimes people running out of the stock market, they can’t put their money in cash in Australia right now, because the banks are returning such a little amount of money, they can’t go back into the stock market. So you know, they sit in this cash or they go into into property, which I think we will see more of not maybe this year, but definitely more of it next year.

Ryan 14:14
So if you’re one of those people that is in a good financial position, and you’ve been sitting on the sidelines, and you’re thinking that now might be the right time for you to jump into the market, but you’re not exactly sure whether or not it’s the right time for you or what could actually help move you towards your property investment goals. Then Ben and the team over Pumped on Property do offer free strategy sessions. So if you head over to onproperty com.au. You can learn more about those free strategy sessions over there. You can book in the time to get on the phone with Ben or Simon or one of the team over there Pumped on Property and talk through where you’re at get a market update, because obviously it’s changing every single day to get a market update of where things are at and then assess whether Okay, could this be an opportune time? Are you? Are you one of those people that you know you should probably wait until you’re in a more stable financial position. So, again, go to onproperty com.au to learn more about those free strategy sessions and book a time that suits you

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