June 3, 2020


Accrue Real Estate


Claire Hielscher

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Buying property during COVID-19

It’s the question that’s been on property investors’ minds since the outbreak of COVID-19 in Australia: How will Coronavirus affect house prices?

Undoubtedly, the pandemic has had a noticeable effect on the property market. It’s changed the trajectory of many predictions and altered the assumed landscape significantly. While the market started off strong in 2020, there are signs that the previously assured momentum is starting to slow.

Despite the predicted downturn, there are opportunities for savvy investors to take advantage of the current climate. This article provides an overview of the current state of the Australian property market mid-pandemic, and explores where the opportunities might lie for investors.

A COVID-19 property landscape

At the beginning of 2020, the predictions for property prices throughout Australia’s capital cities and regional areas were quite momentous.

The strongest capital gains continued to emanate from Sydney (+1.7 per cent) and Melbourne (+1.2 per cent). Overall, February’s figures showed the annual growth rate rose to 4.1 per cent – the fastest pace of growth for a 12-month period since December 2017. Coupled with Australian Bureau of Statistics (ABS) data showing a 2.4 per cent quarterly increase in prices, 2020 was looking unstoppable for house prices.

The story now reads a little differently. As the latest figures from CoreLogic reflect, although most regions recorded a rise in home values through April, the national monthly pace of growth more than halved, dropping from 0.7 per cent in March to 0.3 per cent. April’s numbers also showed the smallest month-on-month movement since last June’s price drops. However, many experts are focusing on an emerging silver lining.

Adjusting 2020 property expectations

For those in the same mindset as CoreLogic’s head of research, Tim Lawless, a healthy dose of cautious optimism can go a long way. He said if governments gradually lift social distancing restrictions, “that’s a positive sign that we might be returning to economic activity sooner than expected, which might flow though to housing values”.

At the same time, Lawless notes that, “Although housing values were generally slightly positive over the month [April], the trend has clearly weakened since mid-to-late March, when social distancing policies were implemented and consumer sentiment started to plummet.” With the long-term planning around a ‘COVID-safe economy’ still unclear, the movement around house prices is still largely unpredictable at this stage.

Whether you’re a first-time buyer, investor or seller, the virus has no doubt cast a large shadow of doubt and confusion over your plans. However, it’s important to remember a few key things about the Australian property market. Namely, how resilient it is to historic shifts and changes.

Why house prices are holding

It’s true, Coronavirus has had a drastic impact on the housing market. However, it hasn’t driven prices to tumble by 30 per cent or more as predicted by some in the industry. This can be attributed to a number of interrelated factors.

RBA rate cut

The Reserve Bank of Australia (RBA) cut rate the cash rate twice in March 2020. Soon after news broke of the developing Coronavirus outbreak, the RBA acted to stabilise the economy, including the housing market.

Welcomed mortgage freezes

Many of the larger banks are offering much needed mortgage relief to customers including ‘freezing’ mortgage repayments for 6 months. They’ve also offered record-low fixed rate loans or allowed refinancing, extending out the mortgage term without penalty.

Government stimulus packages

While many businesses have been forced by circumstance to either let go of or furlough staff, help is available. The federal government has announced substantial financial stimulus packages, including the $130 billion JobKeeper Payment. While not a long-term solution, the stimulus aims to allow people to access some funds to tie them over in the short term.

Investors faith in the market

The shares versus property argument is still alive and well, but many investors are opting to invest in the property market. Due to the longer term and less liquid nature of the asset, property is seen by many as largely less volatile than the share market.

The housing market has bounced back before

If the property bounce back of 2019 has taught us anything, it’s the importance of having a long-term perspective when it comes to the Australian housing market. We don’t have to look far for evidence to support this lesson. Prior to the outbreak, 2020 was set to break records as the fastest recovery in the Australian property market. The pivot from the 2018-19 downturn to the 2020 recovery demonstrated that the recovery of the housing market is a complex one. And while it won’t happen overnight, a reopening of the economy and a lift in consumer confidence could prove to be incredibly influential.

With restrictions already starting to lift and buyers returning to auctions, the future is already looking brighter for property investors.

Now could be the time to invest

At Accrue, we always look for where the opportunities are, both now and in the future. No matter the market or climate, we’re here to help you turn a challenging time into positive one. Contact our team and let us help you better navigate the changing lending landscape with ease.

Disclaimer: This is general advice and has been prepared without taking into account your particular situation or needs. You should consider whether it is appropriate for you before acting on it.