19 June, 2020 / Category: Coronavirus
We’re in a precarious time – unchartered waters – yet there’s many professing ‘expert’ opinions on how the property market will fare. Most conversations I’ve had in the past six months have addressed the question of ‘when’: when will we see the bottom? How far will prices plunge? What will happen when mortgage relief ends? And, so on.
I’ve been in property more than 21 years and have never seen conditions quite like this – even the GFC is incomparable. As a buyers’ agent I see, firsthand, buyer behaviours, which offer a depth of knowledge as to what people on the buying side are thinking and planning. So, let me tell you what I do know and what I am seeing…
Everyone’s differently affected by Covid – the negative impacts haven’t been felt by everyone. And, much like during the GFC, there will be secure buyers looking for opportunity.
When Covid first hit roughly 30% of our clients put their property searches on hold because of job concerns, and the subsequent impacts. Every one of those clients has since recommenced their searches; some have even recommenced with their working hours reduced because they’re able to reduce budgets to buy better in these conditions. Other buyers have decided they can get more for their money. Regardless, the point is, they’ve all come back.
The average buyer will pick up that, across the board, prices are falling. But, there’s no overarching blanket for the Melbourne property market – there are markets within markets. If you drill down you’ll find that some locations are still growing: there are price points that are prospering, alongside others that are softening.
A lot of people have come to me and asked if they should wait until September to buy – this is when mortgage relief ends. I think there will be some opportunity, but will it be the right kind?
Typically, when someone’s under financial stress, they liquidate their beach house or investment property, not their principal residence. I don’t believe, therefore, that September will see a flush of A-grade homes at discounted prices. We may even see increased buyer competition for the properties that do become available.
We have seen softening in the upper end of property markets – 5% give or take. And, we’ve also seen the first-home buyer market, sub $1m, boom, with hundreds of attendees at inspections, queues for property viewings, multiple bidders, and offers. Those that have the deposit are looking to buy now and the demand will likely underpin the investment-grade properties that could become available come Spring time.
We do know that there has been a large percentage of people who’ve put their mortgages on hold, but many did so with a ‘save for a rainy day’ mentality. The same occurred with rental properties, and tenants applying for rent relief. Of the 650 properties under our management, only 7% had legitimate claims processed through REIV (Real Estate Institute of Victoria).
It would be remiss of me not to discuss stock levels – currently we are sitting 30% below average and 21% below the 10-year average. Is this the new norm? It could be for some time. While we have demand to buy quality property, and we have limited stock, this may underpin values. Again, forming part of my refute to the market dropping as dramatically as some people predict.
So, when should you buy? In my view, if you’re trading up or an investor, then now and over the next 6 or so months. If you’re buying to hold, then any adjustment will have little relevance long term. Most people who have cash to buy now will make the error of holding until they think the bottom has been reached and then risk missing out. The rebound can be hard to judge and is often so fast you won’t know its reached bottom until it’s on the way up again.
The situation with Covid-19 is unique, but I do think we can look to the way the property market has fared in other challenging circumstances for some guidance on what we might be facing: