It is very common to see people asking questions about how the COVID-19 outbreak is going to affect housing prices. The bottom line here is that it is going to be negative for anyone that wants to sell their house as the prices are going to go down. There have been significant discussions about the property market and the wider effects of COVID-19 on the economy. Still, interest cuts that we were made are now easing the credit conditions for some. Property investment strategies for individuals with essential and secure jobs would include purchasing now while prices are low.
Stimulus packages and the rate cuts
The rate cuts and stimulus packages are only going to do so much. The Reserve Bank of Australia has cut rates after the Coronavirus outbreak worsened. This is positive for the housing market on its own as prices will now stabilise and may even go up slightly. The bank is cutting rates due to the Coronavirus negatively impacting the economy as a whole; there is no escaping that. The government has already given out a stimulus package, but there is going to be a further fiscal stimulus to come. There are going to be more negative effects on employment also, bringing in an even bigger shock to the economy.
The housing market is going to see a pullback of buyers and will be taking forward drive out of the market. This will result in us seeing the prices fall. Even looking at what it has done to asset prices, it is evident that COVID-19 has hit the economy hard. Interest rates are low but so is the disposable income of many at this time due to job losses or uncertainty.
For those who have wealth tied within the share market, their investment profits have diminished, which means the potential for using that wealth to buy into the housing market is lowered significantly.
Looking to buy?
At the moment, those who are in very secure jobs are really in quite a good position as the market has become weak. The virus has taken out a big group of buyers; those who are going by the wait and see approach and those who cannot buy due to a reduced income. Some people have not even been able to keep their job at all. These types of buyers have been taken out of the housing market for the time being.
I want to sell
If you are a seller, then you need to appreciate that the market is going to become weaker. The would-be sellers that once had flexibility are now deferring, which can cushion those prices falling. There is still going to be those people out there that need to sell their home for whatever reason. The turnover is going to decline, but we are still going to see homes coming out in the property market.
For the property investor
The market has become difficult for investors. The investors can benefit greatly from the decline in rates. Still, this benefit is offset due to the declining rent as many lose their jobs and are unable to pay. If landlords are having to pay property management fees and pay mortgages to banks, it can be stressful if a tenant cannot afford their rent.
The Coronavirus is causing a weakness in the economy, which is only going to accentuate the downward pressure that is on rent within the short term and investors need to be aware of this. If the prices come down, then the investors are going to be in a more secure position to buy. However, the weakness is still going to remain in the rent and will remain for sometime after this virus has disappeared.
In each state, the markets are doing something different. Still, the main point is evident right across all the markets, which is that the virus is impacting the property market everywhere.