Among a constant stream of alarming news reports and social media posts, as well as sweeping restrictions on movement, it might seem like an odd time to consider buying a house in Perth.
However, assuming the Perth property market is on pause could mean missing out on a dream deal on a new home. Social distancing and preventative health measures have not stopped the property market in its tracks – yet.
While nobody can say with 100% certainty how long the wider economic burdens are going to continue, and our first priority should always be protecting people most at risk (physically and financially), the market could see changes in the future once we safely navigate the ongoing health crisis.
Easing The Financial Burden
In March the RBA lowered already historically low cash rates (twice) to just 0.25%. The big 4 banks and some smaller lenders announced ‘mortgage holidays’ to give homeowners a much-needed break among mounting financial pressure and rising unemployment rates. A two-stage Government stimulus package will inject $189 billion into the economy to support small businesses and Aussie households.
Of course, the reason for these measures is to weather the anticipated storm of an economic downturn. COVID-19 is causing unprecedented global shutdowns as we find ways to slow and hopefully stop the virus. Thousands have already lost their jobs and more will follow.
What It Means For The Perth Property Market
Lower housing prices in 2020
As the number of confirmed Coronavirus cases edges above 200 at the time of writing, Western Australia’s economy is expected to take a hit along with the national economy, bringing down property prices. Forecasts of the severity vary, but analysts expect property prices to dip by 7-10% before rebounding in 2021.
Slowing demand
Social distancing, financial strain and uncertainty are likely to create a headwind for housing demand. This could slow the expected property market value slide, or it could mean fewer prospective buyers competing for fewer properties. Auction clearances dropped the first weekend after social distancing measures came into effect, though they still remained firm at a national average of 61.3%.
Buyers in a strong position can get a good price
The Perth property market doesn’t move in line with the share market. Due to the illiquidity of homes and the time it takes to prepare, list, sell and settle a house, the wider economic slowdown can only be used as one indicator among many when it comes to predicting house price movements.
However, many of those signals are pointing to a price drop this year. Combined with the favourable lending conditions we outlined earlier, buyers in a stable financial position could shave thousands off a mortgage during the economic uncertainty.
Looking for specific advice on how COVID-19 will affect settlement for an in-progress property transfer? Give us a call today to discuss your situation in more detail.
Is There A Trend?
The saying goes “past performance is not an indicator of future returns”. Buyers comparing the current economic downturn to the GFC of 2008/09 or the mining slowdown that triggered a price drop soon after might be disappointed to discover house prices aren’t following the same trends.
Property analysts – and conveyancers, for that matter – will stop short of putting a date on a price rebound with any confidence. The long-term health and wellbeing of our nation is priority 1 for the Government, as it should be for all Australians. What that means for property prices in the months, years or decade to come is unfortunately a matter of “wait and watch”.
Less Foreign Investment
Foreign investment is a tricky one for our crystal ball to clarify. However, foreign investment makes up less than 10% of the national property market so demand shifts are unlikely to have a large impact.
That said, with travel restrictions and global financial pressure predicted to reduce the number of people entering Australia for tourism, education and healthcare. So landlords relying on foreign rental income will need to adjust, and overseas buyer numbers may dwindle to open a small gap for local property investors.
What About The Innovations?
Industries around the world are making rapid adjustments to working styles to slow the spread of COVID-19. Social distancing has shown the viability of virtual events and video chat meetings in a remarkably short time.
And the Perth property market is not exempt from innovation.
No buyer wants to commit to purchasing a home sight unseen. So how are real estate agents and related industries adapting to safeguard our health, while continuing to do business?
Virtual walkthroughs
Agents may soon offer virtual walkthroughs to show properties while respecting social distancing guidance. There are several ways you could soon be stepping in to an inspection without leaving the couch:
- Pre-recorded video tour
- 360° imagery
- Google Indoor Maps
- VR tours (especially for off-the-plan and proposed developments)
- Real-time video calls
Live streamed auctions
Many events have been forced online, from music festivals to morning meetings and even social catch-ups. We humans are unfalteringly social creatures, so it’s likely online auctions will gain popularity in the property market nationwide.
Whether these are simulated ‘eBay-style’ auctions or live video conferences remains to be seen. However in-person auctions are, for the time being, an unnecessary and irresponsible lack of caution and should be avoided.
What Should Buyers Do Right Now?
If you are in a position to consider buying a property, the first step is to get financial advice from a property professional who knows more about your situation. Unlike shifting share markets, buying a house or apartment is not a decision anyone should make with urgency.
In Australia, as around the world, the COVID-19 situation is changing rapidly. Prioritise your health and the health of your family, practice social distancing, implement recommended hygiene practices, and make smart decisions about leaving your house (or buying a new one).
Here at C&R Settlements we are watching the Perth property market with interest while we practice social distancing. Our clients are still getting the same level of personalised, professional conveyancing service they expect – just with some adjustments for meetings and document handover.
Contact us to find out how we can bring a sense of settlement back into your life during these unsettled times.